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Parnell demands senators pass oil tax bill

Legislators say they've saved the state billions by stopping ill-conceived bill

Posted: February 15, 2012 - 1:03am
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Noted oil consultant Pedro van Meurs, from the Van Meurs Corporation in Nassau, Bahamas, testifies before a joint meeting of the Senate Finance and Resources Committees on Tuesday in the State Capital Building.  Klas Stolpe / Juneau Empire
Klas Stolpe / Juneau Empire
Noted oil consultant Pedro van Meurs, from the Van Meurs Corporation in Nassau, Bahamas, testifies before a joint meeting of the Senate Finance and Resources Committees on Tuesday in the State Capital Building.

Gov. Sean Parnell said Alaska is in a crisis, and only he is doing anything about it.

He told reporters at the Capitol on Tuesday he was not willing to let oil production to continue to decline at 6-8 percent a year, and that only a bill he has proposed can reverse that.

“Alaska has already lost 140,000 barrels a day (of oil production) in the last four or so years,” he said.

Alaska’s oil tax law, the Alaska’s Clear and Equitable Share Act, or ACES, was adopted about four years ago, leading the governor to suggest a cause-and-effect from that plan.

“I’m not willing to accept the status quo decline, I’m not willing to accept Alaska’s economic decline,” he said.

Parnell again blamed the ACES tax for driving oil industry jobs from the state, despite news from his own Department of Labor & Workforce Development that oil industry jobs are at record highs.

Parnell said House Bill 110, which he introduced last year, was the only way to get to the 1 million barrels a day of oil he said the state needed and keep Alaskan workers and companies from going to North Dakota.

That bill passed the House last year but is stalled in Juneau Sen. Dennis Egan’s Labor & Commerce Committee, where it apparently has little chance of passage.

Elsewhere in the Capitol, Pedro van Meurs, a legislative consultant on oil industry fiscal systems, said the bill wouldn’t do what Parnell claimed and wouldn’t attract the investment needed to reach that million-barrel level.

The state’s big oil producers, including ConocoPhillips, BP and Exxon Mobil Co., are not actively trying to increase production, but instead are trying to produce the state’s remaining oil as efficiently as possible, a standard industry process called “harvesting,” van Meurs said.

“They are literally harvesting as much as they can harvest,” he said.

They’ve been doing that for many years, he said.

“Alaskans have to realize that the three major oil companies are drawing money out of Alaska at the absolutely maximum rate that is technically and economically justifiable,” he said.

The companies are not reinvesting profits made in Alaska in the state for the low-margin business of extracting the remaining oil, but instead are looking for bigger opportunities elsewhere.

Senators who have been listening to van Meurs said Tuesday that his presentation showed they made a good decision by not passing House Bill 110 last year.

“It should be very clear now why the Senate took such a strong position and wanted the information before we took action,” said Sen. Bert Stedman, R-Sitka, co-chairman of the Senate Finance Committee.

He said the Senate was being asked to make decisions that could cost the state billions without adequate information to back up the need for action.

Senate President Gary Stevens said van Meurs’ information indicated “it would have been quite a disaster if we’d passed House Bill 110.”

Parnell maintained his bill was the only plan to get to his goal of a million barrels a day. They need to end the “paralysis of analysis,” and pass his bill, he said.

“They are driving Alaska into the ground and I am not going to let them,” he said.

Adding urgency to his call was his claim of a steady increase of 6-8 percent a year, though his own administration’s experts in the Department of Natural Resources and Department of Revenue are projecting a decline rate of about one third of that.

Parnell defended using the higher projected rate of decline than that provided by state staff, saying that’s what he’d been told by the companies themselves.

Consultant van Meurs told the legislators that Alaska’s field decline was normal for aging fields, and much less than the decline facing some other areas, such as Mexico.

“House Bill 110 was not the way to go, that’s crystal clear from the evidence,” said Sen. Hollis French, D-Anchorage.

• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com.

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