This editorial first appeared in the Anchorage Daily News:
Judge Sharon Gleason’s decision that the trans-Alaska oil pipeline has up to 50 years life points up something that Alaskans need in the oil tax debate the Legislature will resume in a few weeks. Let’s have some clarity about numbers.
Much of the argument in the property-tax case Gleason has been hearing has been about the level of oil throughput that can sustain the pipeline. Judging by evidence at trial, the answer depends on who’s asking and for what purpose.
One witness for Alyeska Pipeline Service Co. testified that the pipeline can’t operate at less than 300,000 barrels a day. Lower volumes mean cooler oil and greater incidents of water, wax and frost woes.
However, studies done for BP indicate that the pipeline can operate safely at volumes of 100,000 barrels or less if the pipeline is fortified with heaters and other technology, all of which is feasible - at a price.
The lower numbers boost the estimates of recoverable oil in leases owned by BP and other North Slope producers, enhancing the companies’ value. The higher numbers, and presumably shorter pipeline life, serve BP and other producers by both lowering the value of the pipeline, and thus property taxes paid to local governments, and lending urgency to the producers’ call for tax cuts aimed at increasing production.
So the Securities and Exchange Commission gets one working estimate. The state of Alaska gets another.
Let’s have one set of numbers please — or several sets, with all their attendant costs and consequences to the state, local governments and the producers.
And we shouldn’t have to rely on tax litigation to reveal them.
This business is thorny enough without a thicket of competing figures. Advocates of slashing tax rates use the imminent demise of the pipeline at lower volumes as one of their arguments. But how close are we, truly, to the end of the pipeline as a functioning system?
Most Alaskans want to reverse the production decline. Disagreement arises in how to achieve the goal — and who pays what price to get there.
The fundamental question remains: If Alaska changes its tax system, what does it gain? We need to make sure we have specific, straight answers — with honest numbers and how they apply.
Clear numbers, please, in oil tax debate.





Comments (6)
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With a double DUH!
Agenda
It is very hard to take the word of these oil companies, they are in the business to make a profit and it seems they don't care if we get our equitable share. The less taxes, the higher the dividends.
We are in a free enterprise system and when they want to do something, it will get done and not until then.
Sovereign Oil Royalties are NOT TAXES for the 1,000th time.
TAXES are paid by those who BUY sovereign oil from Alaskan oil producers. We don't tax producers one cent. They pay us royalties on the sale of our property, they get a cut. The only difference between Oil Producers and drug dealers is that drug dealers do not charge their end customers tax. Otherwise the distribution chain is about the same.
always questionable
Oil companies information on their operation has always been questionable. You read a report where an oil company claims to have produced so many barrels of crude according to their news release. Then you actually read the annual report of the same company and the difference in production figures is amazing. I am of the opinion that the annual report information is probably the true information for oil companies do not care about accuracy in news release. However oil companies are extremely careful to insure information on their annual reports can withstand the scrutiny on the SEC.
Back under ELF....
When we only got a percent on the profit of the sale of a barrel of oil we could NEVER get them to disclose how much it cost to produce one barrel of oil, therefore we 'took their word' for it and sure enough it turned out to be that they lied and were forced to pay what they owed.
The problem with taxing profits is...
The problem with taxing profits only is, any bean counting accountant can spin numbers to make profits appear lower than they actually are if the wanted to.
So, we have to take their word for it, or hunt down the data ourselves, then make adjustments (after any lawsuits are settled).
If ACES is to be amended at all, we should simplify it this way: pay a royalty on each barrel of oil you ship through the pipeline, and that royalty would be based on the price of oil the day it is shipped.
Therefore, if oil prices go up, so do the royalties. No caps.
This would be much easier to monitor as opposed to each company's massaged profits reports.