The rich get richer

As it turns out, we couldn’t tax the oil companies enough to make them leave Alaska if we tried. (Well, maybe we could, but you know what I mean.)

Why? Well, according to a big-time consulting firm hired by Gov. Sarah Palin’s administration, Gaffney, Cline & Associates:

[The] [d]rilling program [at Prudhoe Bay] is so profitable that under even the most extreme net tax structure, oil companies would want to continue their reinvestment.

What does that mean in plain English? It means the companies will make so much money from future investments to get more oil from Prudhoe Bay that they’ll make a considerable profit even at really, really high taxes.

So if you are among the – oh, I don’t know – half a million Alaskans who wish Exxon would just go away, bad news. They ain’t going anywhere no matter what kind of tax bill we pass.

You can read more about the Gaffney, Cline report here.

More on the (H)O&G bill

If you are feeling wonkish, you can get more detail on the changes the powerful House Special Committee on Oil & Gas, of which I am a powerful member, made to the governor’s bill here.

If you’re not, a fair summary is this: It raises less money than the governor’s bill until 2013, when, if prices are high, it raises more. And changes in some provisions make the bill better for producers and worse for explorers.

The Spirit of Ramona

I was taken over by the spirit of Ramona Barnes this week. Ramona was a famous character in the state House, known for her combination of toughness and, shall we say, a flair for the dramatic. I got to know her a little bit when I was still working as a newspaper columnist. One time, when everyone was all atwitter about an eruption of Mount Ramona, I ran into her in the hall.

Heard you provided some fireworks today, I said.

Ramona gave me a grin.

Yes, she said, I pitched a fit and fell in it.

I did the same on Tuesday. Here’s why.

All of the discussion about the effects of various kinds of taxes is based on computer models. The computer models contain variables, places where you can plug in numbers and see how a tax plan works. In order to compare, say, a tax rate of 22.5 percent to one of 25 percent, you have to keep all the other variables the same. Among those variables is how much it costs to produce a barrel of oil and what kind of credits the taxpayers can claim to lower their payments.

The importance of the models is that you can compare changes, not that the models reflect reality. If you’re like me, and you’re struggling to make sense of all of this, the worst thing that can happen is for somebody to start changing the variables, because then you can’t compare what they are saying to anything that’s been said before. Instead of comparing apples to apples, you’re comparing apples to bananas.

So I was really careful not to let anybody get away with changing variables to make their position look better. When they tried that in testimony to the powerful House Special Committee on Oil and Gas, of which I am a powerful member, I told them not to do it. That happened more than once.

Imagine my irritation when I figured out, after the fact, that a consultant had done just that. In showing us how the tax plan the majority of the committee favored compared to the current tax law and the governor’s proposed tax law, he changed the assumptions in a couple of ways. One made the governor’s proposal look worse. The other made the committee’s proposal look better.

So, in the House Democrats’ press availability on Tuesday, I -- to quote the inimitable Ramona Barnes -- pitched a fit and fell in it.

If you saw any of that and are wondering: I’m feeling better now.

More later,