1.  ADN.  On Tuesday, Sen. Lisa Murkowski asked Larry Persily (NGP Photo), the president’s nominee to be federal coordinator of the Alaska gas line project, how he would apply his knowledge of oil and gas through a “federal lens.” “I just deal in reality,” Persily said. “I don’t do vision statements very well.”  (Commentary:  Good answer, Larry.  Too many are speculating; too few are speaking with restraint based on facts. – dh)

Representative Les Gara, Anchorage, Alaska. Northern Gas Pipelines File Photo by Dave Harbour (Added post-publication of story)

2.  ADN, by Sean Cockerham.  (See our Alliance story.)  State House Democrats today were assailing the industry ads calling for a rollback in state taxes on oil company profits.  “The Alliance ads are dishonest,” said Anchorage Democratic Rep. Les Gara. “When jobs are up, it’s not OK to lie to Alaskans in seeking a tax break. When investment is up it’s not OK to lie to Alaskans to get a tax break. When profits are up, it’s not OK to lie to Alaskans to get a tax break.”  Gara cited the recent Alaska Department of Revenue report saying that oil industry jobs and investment have risen in the state since Alaska increased its oil taxes in 2007. Conocophillips has taken $6 billion in profits from the state since the tax change, the Democrats said, describing it as the company’s most profitable oil province in the world.

 

It’s Not O.K. For Public Officials to Hurl Insults and Demonize Citizens

See our related piece, tomorrow
 
by
 
Dave Harbour  
 
Certain Legislators are complaining that oil companies are making so much money and investing so much in Alaska that citizens have no right to petition their government for more moderate taxes.   Let’s look into it.
 
According to the Alaska Department of Labor, the number of Alaskan unemployed claimants in the oil and gas support sector is dramatically increasing–after decreasing until 2006: 2003-2,229, 2004-1,198, 2005-914, 2006-773, 2007-997, 2008-1,356, 2009-2,205.  Support industry jobs are like the canary in the coal mine; beware when they begin falling.  
 
Meanwhile, as the oil sector responsible for over 85% of the state general fund decreases along with the annual 4-6% decline in Trans Alaska Pipeline throughput, state government jobs and the state budget continue to increase without restraint.  This trend is unsustainable.  
 
One cannot ignore certain legislators’ efforts to criticize our oil industry neighbors and investors for making money at the same time that the state–without taking a risk or investing money–is marching away from the Prudhoe Bay wellhead with truckloads of largely unearned, million dollar bills (i.e. Royalties are ‘earned’ in the sense that companies agree following a bidding process to pay the state, as owner of the resource, for the right to develop that resource.  An oil investor would always hope that the taxes–as opposed to royalties–would remain stable for the life of the investment but that has never happened in post-pipeline Alaska history):
 
We are mindful that while oil company profits logically increase as the price of oil increases:
·         companies also pay more state and federal income taxes, and
·         companies pay more royalty dollars to Juneau, @ 12.5% of the wellhead value, and
·         Even under the old, flat 15% gross severance (production) tax, as prices increased, the state share increased in precise response (Then came the infamous and Draconian progressivity feature added onto the Alaska Legislature’s 2006 shift to a 25% net production tax.  Furthermore, our progressivity model is probably the most severe in the world).
 
We also note that when the price of oil decreases the state and local governments still collect the same—not a lower–amount of oil and gas property taxes.
 
Alaska’s investment climate more closely resembles that of a third world country than that of a freedom loving country.  A major reason for this is the amount of taxation and the unpredictable rate of increase of taxation.  Add those factors–along with an unfriendly government–to our economic liabilities of remoteness from the markets, harsh and expensive operating conditions and high transportation, procurement and labor costs.  
 
Perhaps one can appreciate, now, why insulting and demonizing the major economic engine in Alaska–which receives better treatment elsewhere in the world–is not O.K.: it is unfair, stupid and suicidal in an increasingly competitive world.  One might also appreciate why lowering the cost of investing in Alaska by some reasonable amount might be in the long term best interest of those who hope to have long term investors employing them and their children while paying for their roads, schools, public safety, social programs, power cost equalization, permanent fund and helpful government bureaucracies.
 
The tens of thousands of Alaska Support Industry Alliance-related employees–and the thousands more dependent on their success–are concerned about their jobs and about the withering Alaska economy.  They are right to speak out.  Furthermore, they HAVE a right to speak out.  
 

Legislators who are creating this cacophony of insults directed at the workers who give life to Alaska’s economy and government, should be ashamed and should apologize.