Calgary Herald by Javier Blax.   Exxon Mobil Corp., Royal Dutch Shell Plc and Chevron Corp., are jumping into American shale with gusto, planning to spend a combined $10 billion this year, up from next to nothing only a few years ago.  (Many Alaskan and Alberta elected officials — obviously — have no concept of the principle of worldwide competition for attracting natural resource investment dollars.  -dh)


Critical Thinking

The end of the Alaska Legislature’s 2017, third trimester approaches.  The socialist-leaning House majority has cut off debate on their version of the state budget, enacted it leaving the conservative-controlled Senate to complete its own budget version, which the two bodies will debate during the last hours of the session.  Alaska’s governor, more aligned with the House’s tax and spend principles will likely weigh in using his “bully pulpit” and/or his veto pen.

Supporting the House position on oil taxes, comes yet another ADN editorial by FOG (i.e. friend of the governor), the wealthy and exceptionally gifted regulatory lawyer, Robin Brena.  Over two years ago, Brena purchased the governor’s law firm, an event accompanied by a certain level of controversy.

In answer to one of Brena’s earlier pro-oil tax increase editorials, retired state senior oil and gas economist Roger Marks penned an Op-ed last year.

Brena’s current commentary repeats most of his earlier advocacies supporting higher oil taxes.   We don’t know if at this critical time in legislative decision making, Marks will trouble himself to restate his more reasonable facts and arguments against Brena’s advocacy.

However, with citizens focused so intently on budget/tax issues, we feel that the critical thinking citizens among us will want to review certain key issues from various perspectives.

S0, for our thousands of readers we provide Nathaniel Herz’ current summary of the House budget approval, Robin Brena’s latest arguments in favor of oil tax increases, and, lastly, a reprint below of our 10-27-16 commentary, “Beware of False Oil Tax Profits”.    (Commentary.  -dh)


 

Governor Jay Hammond. Northern Gas Pipelines file photo. Copyright 2001 Dave Harbour

As further reference to our readers, we provide this link to the most unique press conference in Alaska’s history.

The meeting involved Governor Jay Hammond and democrat/republican leadership of the Legislature on March 18, 1981, 36-years ago Saturday if we calculate correctly.  Note that the state’s leaders had decided to repeal a discriminatory, “separate accounting” state oil income tax, likely to be overturned by the courts, while repealing the state’s personal income tax.

The players, you will hear, pretty much agreed that while the split of oil revenue was approximately 1/3 to the federal government, 1/3 to the oil producers and 1/3 to the State of Alaska, the state’s portion was somewhat smaller.  You will see that while there seemed to be general agreement that the state’s share was smaller, it generally represented a ‘fair share’.  The state and its producers generally experienced tax stability for over two decades, until 2006.  As Governor Murkowski left office and Governor Palin assumed office, the easily calculated 15% severance tax was changed to a complex net profit, progressive production tax, applied retroactively, that ended the era of tax stability that had produced such dramatic increases in the lives of Alaska North Slope reserves and the Trans Alaska Pipeline System (TAPS) which transported those reserves.  -dh


Beware of False Oil Tax Prophets

by

Dave Harbour

Roger Marks, Senior Oil & Gas Economist. Northern Gas Pipelines file photo by Dave Harbour

Roger Marks, Senior Oil & Gas Economist. Northern Gas Pipelines file photo by Dave Harbour (Scroll down to Ak-Headlamp report for Marks’ reference.)

Regarding our piece yesterday about one lawyer’s advocacy for higher oil industry taxes, we provide (BELOW)  Ak-headlamp’s comment today.  We would only add that the lawyer proposes a “fair share” oil tax policy without definition or rationale.  He simply opines an assumption that a “fair share” of oil wealth for the bureaucracy should be “one-third of gross”… not one-third of net income!  Calculating a net income would fairly allow a company to deduct costs after taking significant investment risks.  Not deducting reasonable and traditional costs, particularly in a low price environment like the present one, could force a company to produce oil at a loss while government would continue to take a “third of the gross” — a true, undeserved windfall — while avoiding the risk inherent in basing up to 90% of a state’s income on a volatile commodity.  The “one-third of gross” suggestion cleverly seems fair, doesn’t it?  After all, it’s only a third!  But upon examination, it creates a terrible economic climate that deters investment and stifles job opportunities for future citizens.  It is grossly unwise — and unfair.  It is merely one more way a socialized government spells the word, “expropriation”.  For real world examples of expropriation, one need only to Google the Argentina and Venezuela case histories.

Beware of false prophets, fellow Alaskans!  -dh


FROM AK-HEADLAMP (Also see this ADN link)

10-26-16-soa-dor-state-oil-revenue

State Oil Revenue Income: Source, DOR

Economist Roger Marks fired back at Robin Brena’s recent spate of op-eds arguing for the state’s “fair share” of oil revenues. According to Marks, “There are two things wrong with this. First, the historical share since North Slope production began has been 23 percent, much lower than 33 percent. If you take the Alaska’s Clear and Equitable Share (ACES) years out (2007-2013), where there were very high oil prices and tax rates, the long-term share is more like 20 percent. (This includes royalties and production, property, and state corporate income taxes, including restricted royalties going to the Permanent Fund.) Anyone can confirm this data using historical information from the Department of Revenue’s “Revenue Sources Books.” The second problem is that this is an ill-advised way to ascribe “fair share.” In fiscal year 2016 the state received $1.3 billion in petroleum revenues, 17 percent of gross market value, while the taxpayers were losing money.”

In North America alone, oil companies have signaled they may collectively hike oilfield spending 25 percent to $110 billion next year, the largest budget increase since at least 2000, according to investment bank Evercore ISI, which surveys the oil companies every year. That money would flow directly to the oil field service companies that make drilling equipment and employ thousands of workers in Houston and around the country.


Note to readers: We at Northern Gas Pipelines have created a huge archive that is searchable.  Accordingly, OUR GOAL IS TO ACHIEVE THE HIGHEST DEGREE OF ACCURACY IN THE FACTS WE PROVIDE IN NEWS REPORTS AND THE FACTUAL STATEMENTS WE MAY MAKE IN EDITORIAL MATERIAL AS WELL.  Our readers are our best editors.  For 15 years we have continued to ask our readers to assist us in maintaining the accuracy and integrity of factual information that scholars and researchers require as they search and use our archives.  Thank you for keeping an eye on us.  You may offer additions or corrections either by emailing us at webmaster@northerngaspipelines.com, or by submitting a comment below for our consideration.  Best wishes, and thank you.  -dh



Note To Readers

We urge readers to ‘like’ our Northern Gas Pipelines Facebook page and ‘follow’ our Twitter feeds.  For, while we do issue periodic ’email alerts’ to our thousands of subscribers, we do not intrude on their days except when we believe we offer them extraordinary developments or commentary.  More often, we alert readers to subjects of somewhat less importance via our Facebook and Twitter feeds.  Thank you for being our NGP reader.  -dh