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A colloquy with Conoco
And how it illuminates the oil tax debate
Herewith, the oil tax highlight of the week: Rep. Kurt Olson gave Conoco the vapors.
In the midst of the House Resources debate on proposed oil taxes Wednesday, The GOPer from the shores of Cook Inlet challenged the new, expensive, slick TV ads orchestrated by the oil behemoth. The Conoco ads are designed to peddle the premise from all our oil multi-nationals that Alaska's taxes are high enough; that new taxes just ain't friendly and could prompt a re-evaluation of  their role in Alaska.
Here's some byplay between Rep. Olson and Brian Wenzel, Conoco's VP of Finance:
Olson--"It's my understanding you're in the process of going back into Libya. Is that correct?"
Wenzel--"Through the chair, Rep. Olson, that's correct."
Olson--"And about 20 years ago all the American companies were thrown out and everything was nationalized?"
Wenzel--"Through the chair, Rep. Olson, yes."
Olson--"What's the government take in Libya?"
Wenzel--"Through the chair, I'm not clear. That exact number you may know off the top of your head."
Olson--"I think it's around 90 percent--does that sound about right?" (It should be noted that total state and federal government take in Alaska, under the committee substitute oil tax bill on the House side is about 60 percent.)
Wenzel--"It is, through the chair, it is very high there's no doubt about that but, if I may continue?"
Olson--"Oh, certainly."
Wenzel--"The difference in my mind is between what's going on in Libya and what's going on here is a matter of prospectivity (sic). Ah, in terms of, uh, the um, known resources--the likelihood of finding large resources to be developed. It's very different in Alaska than it is in Libya. The other--my statement before--it was: we are going back into Libya though not through, uh, as I understand it, through lease bid rounds but more through, um, coming to an agreement with the Libyan government about stepping back into the assets we previously had there. It's very different from simply buying into the ongoing new leases."
Olson--"Well I guess the question that needs to be asked is, since their taxes are 15, 20 percent higher (actually about 30 percent higher) than ours, are you gonna be running ads on TV in Libya [about high taxes on oil]?"
Wenzel--"Through the chair, no I don't believe we'll be running ads on Libyan television."
Rep. Olson is not meekly serving his time in the legislature. His colloquy with Conoco punctures the notion that the tax proposed by the governor or tax rates discussed in the legislature are unfriendly and unfair. In his byplay with Conoco, Rep. Olson reinforced the premise of Dr. Pedro van Meurs, the governor's consultant, that "wealth is slipping through Alaska's fingers." It's our oil, owned by Alaskans. Oil we've been giving away according to the good Dr. van Meurs.
Many other colleagues of mine in the legislature also are not meekly serving time. We feel a real sense of bi-partisan responsibility. This oil and gas tax issue, without doubt, is one of the biggest decisions we'll ever make on behalf of the Alaskans we serve.
Because I sit on the first committee of referral on the Senate side, I've been at every Senate hearing on oil and gas taxes for every minute (with the exception of two quick bathroom breaks). I've been poring through six binders, so far, of oil and gas tax data. So far my conclusions are:
- we can't accurately predict future oil prices;
- we can't accurately predict global competitiveness;
- we can't accurately predict global energy consumption; and
- there is no perfect oil tax.
Despite the Magic Eight Ball difficulties (Question: will oil prices rise, fall, or stay the same?  Answer: perhaps.), the legislature is beginning to coalesce around certain conclusions. Many of us agree with the independent consultants that the governor's tax bill--a tax recipe multi-national oil companies concede they can accept--needs significant change.
And the change process began this week. Earlier in the week, the House Resources Committee trotted out their version of a fair tax. They marginally hiked the tax rate and cut some of the tax credits. Today, the Senate Resources Committee rolled out its version of a fair tax recipe. The committee also tweaked the taxes higher and changed some of the tax credits.
Here's how we're getting to these conclusions:
- It's become clear the oil and gas tax rates, especially the rates for legacy North Slope fields like Prudhoe, can be more aggressive without being punitive to our most important economic partner--the oil and gas industry. Every independent consultant, including gubernatorial consultant Dr. Pedro van Meurs, says a tax rate significantly higher than the one the governor advanced (and the big oil companies blessed) will not harm the industry and will keep Alaska globally competitive. We'll be competitive from the Halls of Montezuma all the way to the shores of Tripoli--especially Tripoli, the capital of Libya from whence the nationalization program was promulgated and from whence the decision of a government take rate of around 90 percent emanated.
- The credits offered to the oil industry are generous. Generosity is not bad if it encourages exploration and development but the independent consultants to the legislature all confirm that some of the credits can be less generic and better targeted. Credits should encourage investment in heavy oil and exploration in Cook Inlet and frontier fields. They're not nearly as important for the legacy fields. For example, a standard $73 million deduction for a frontier explorer makes some sense. It doesn't make sense for Exxon who pumps from legacy fields and made $10 billion in global profits in the last reported quarter.
- There's fuzzy language in the governor's bill and that creates a Disney-sized playground for lawyers. Litigation in this arena is always a given--even if the bill is as carefully crafted as a prayer--but there's excessive fuzz in the governor's bill. The more precise the terms we use, the more we limit litigious behavior.
Those three umbrella conclusions have been clarified through three intense weeks of committee hearings. Now begins round two--an intensive round of hearings on the legislative proposals that grew out of review of the governor's proposal. In round two, we'll see if the bi-partisan work in the House and the Senate, took big, robust strides toward addressing conclusions one, two and three.
Phone: (907) 465-4947
Fax: (907) 465-2108
Mail: Sen. Kim Elton, State Capitol
Juneau, AK 99801
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Capitol Undercurrents
Zingers--For a decade now, I've been going to the AWARE Shelter annual dinner that honors Juneau women of  distinction. And, for the same amount of time the MC has been Liz Dodd, a person blessed with a wonderful sense of humor and impeccable comic timing. This year was no exception and, as is her wont, she focused on some political issues the legislature is trying to wrestle to the ground. I couldn't keep up with my note-taking but here are a few snippets I was able to scratch on the back of my program: "One of the bills under consideration is Rep. Anderson's colorectal screening bill to enhance screening for colon cancer. The bill is also known as the gas pipeline bill." Another zinger: "I watched the Oscars and noted the best song was 'It's Hard Out Here for a Pimp' and thought it might make a good state song." Finally, she raised the issue of SJR 20, a constitutional amendment stopping the government from offering health and other benefits to single sex partners. "Our state constitution," she said, "confers on all Alaskans the right to wear a beer-stained t-shirt with the slogan 'I'm tier 1 and I'm single'. Same sex folks should be allowed to wear the same t-shirt [and solicit in the same way]."
 Women of real distinction--The MC's humor should not obscure the accomplishments of recipients of this year's awards. Nora Marks Dauenhauer, a writer, researcher and editor focused on enriching and documenting Tlingit culture; Lynette Dihle, a counselor and child advocate at Riverbend Learning Community; Sally Rue, a life-long education advocate; and Tamara Simone Collins, a caregiver to Alaskans and Alaskan families dealing with cancer. These are Juneau folks who enrich our community, our region and our state.
 An Obama moment--Couldn't resist passing along this quip from the junior senator from Illinois. At a recent annual press dinner in Washington, D.C., Sen. Obama tweaked the president by suggesting that he "spy on the Weather Channel and find out when big storms are coming." At least that's what New York Times columnist Maureen Dowd reported.
Hey! Whattya think?--The governor told us at the beginning of the session he wanted to spend a ton of money on an Alaska public relations effort that  convinces Americans they see us all wrong. The first step is a request for proposals the executive branch issued last week. They're looking for a firm to do around $150,000 worth of research on "Americans' current attitudes and perceptions of Alaska and how they may be changed." In case there's any question about how the governor feels, section 4 of the RFP begins: "The nation's view of Alaska is sorely distorted. . ." Sounds like he doesn't really need to pay to find out "current attitudes"--he can move straight to the part about "how they may be changed."
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