Facts about the oil tax cut

The debate on Gov. Sean Parnell’s proposal to roll back the state’s share of oil revenue by nearly $8 billion over the next five years has been political, not factual. It’s time we shared what we’ve learned in committee testimony so people can hear the facts.

There are smart ways to require more investment, and more oil production. If the state is going to offer tax reductions, we should get something in return — more jobs and more needed development. Isn’t that how you’d write a contract if you were going to give away $8 billion?

House Democrats offered that approach, offering amendments that would allow state tax reductions only if companies drilled more exploration wells, or produced badly needed oil production facilities for new oil. We have filed legislation to also offer tax reductions if companies increase well drilling activity above their past five-year average. We propose accountability — tax breaks only with a guarantee of new exploration and development.

The governor proposes the opposite. He relies on a hope, wing and a prayer that Exxon, ConocoPhillips and BP will give us any of the $8 billion in tax reductions back. He offers tax credits for work companies are already doing, in fields they are already producing. His bill allows the oil industry to take every penny of his proposed tax reductions out of state, to Dubai, Azerbaijan, and even to places like Libya and Venezuela where Conoco’s assets have all recently been lost to nationalization and war.

A plan that doesn’t work, and that spends away state revenue, will lead to mass layoffs of construction workers, teachers, firefighters, police and others. Changing this state from one with a surplus to one that suffers from deficits will leave towns with “House For Sale” signs, not jobs. And the worst thing is, as the evidence piled in that the governor’s proposal won’t work, he hasn’t listened.

The evidence makes clear that the governor’s plan needs to be dropped in favor of smarter ones.

The governor started out claiming Alaska isn’t getting enough exploration, yet the vast bulk of the governor’s giveaway would go to producers who aren’t going to explore. Exxon and BP testified if his bill passes they won’t likely drill a single exploration well. ConocoPhillips testified they might, or might not. And the administration’s own ads in the Petroleum News on March 27 concede, “Alaska is successfully encouraging investment from companies that are new to this state….”

What else have we learned? More that should concern you. The Department of Revenue says that even if the governor’s bill were to add a wishful five percent increase in production, the state will receive roughly $6 billion less in revenue in the next 5 years than we will under current production forecasts, and under the current law. If his bill “works,” we still lose billions.

The governor also relied on something called the Fraser Report — which his commissioner touted as credible until he realized he was reading it wrong. He dropped it when he realized it said 74 percent of those surveyed thought Alaska’s oil tax system did not deter investment.

ConocoPhillips recently issued public relations statements that they’ll consider development that logic says they were going to do regardless of the governor’s bill. They largely proposed development in existing fields they have sunk costs into, and that they have every incentive to maximize production from. Alaska already offers credits and deductions that pay more than 60 percent of these capital costs. One shouldn’t take too seriously the PR push that work in existing fields won’t happen unless they get more tax breaks.

And what of claims oil companies are suffering? ConocoPhillips recently bragged to investors that they earn “strong cash margins” in Alaska. BP and ConocoPhillips have each reported over $7.5 billion in Alaska profits (BP legally deducted $1.5 billion in Alaska profits for its Gulf spill) since 2007.

The Senate is right. The governor’s plan is poorly crafted. It’s time for the governor to start listening to the evidence, rather than sending out PR.

• Gara, an Anchorage Democrat representing District 23, has been in the House of Representatives since 2003. Contact him at Rep.les.gara@legis.state.ak.us.


Mon, 02/27/2017 - 08:37

Rich Moniak: Presidential lies that matter

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Mon, 02/27/2017 - 10:20

Letter: State senator’s form letter full of misinformation on Planned Parenthood

I have been in correspondence with my Senator, Dan Sullivan. I was able to let him know by email that I want him to continue support of Planned Parenthood federally and locally. I am disheartened by the form letter I received from him. His letter was full of misinformation that reflected/used the words that pro-life organizations do. If he is going to write back to his constituents, he should use language that shows he is aware of what the laws are and how funding really works. Read more

Mon, 02/27/2017 - 08:32

My Turn: Gov. Walker shouldn’t fleece taxpayers while cutting budget

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Mon, 02/27/2017 - 08:31

ANWR: Let it be

Nearly 20 years ago historian Stephen Ambrose visited Juneau as part of the Alaska Humanities Forum. The author of “Undaunted Courage,” “Citizen Soldiers” and other bestselling books, Ambrose said the last century had been darkened by world wars. But overall the century’s theme was inspiring: democracy prevailed over totalitarianism.

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