 3517x4406.jpg "Keith Silver")
Here is Keith Silver’s (NGP Photo-L) testimony to the Alaska Legislature about how he was laid off from his position on the North Slope. He explains that it’s not just his job that was lost. North Slope investment losses trickle down to the support staff in Anchorage as well.
ADN by Richard Mauer. In a lunchtime address and rally on
Thursday billed by the Make Alaska Competitive Coalition as BP’s chance to present "specific commitments" should the cuts pass, John Minge (NGP Photo-R) was short on details — he said he didn’t want to waste company money making plans that won’t be pursued under the current tax regime. But that didn’t stop the 250 or so on hand from cheering….
See this story on an earlier rally with ConocoPhillips President Jim Mulva.
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Here is a video of the speech, courtesy of Resource Development Council for Alaska. As the ‘tax reform rally’ was occurring in
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Anchorage, Alaska House of Representatives Speaker Mike Chenault (NGP photo) in Juneau took to the floor for his own speech. He used the very quotes that Senate President Gary Stevens usedthe day before to support his opposition to tax reform by passage of HB 110. 
Then, compare it to
Our Commentary. Carlile Transportation President Linda Leary (NGP Photo) added a powerful presence to the rally, by hosting the event in her company’s impressive Anchorage warehouse office facility and prefacing her introduction of BP Alaska Exploration President John Menge with a personal call to action. She spoke of the opportunities available to Alaska, its companies and our children. She recalled how her son had testified ten years ago during the BP-Arco merger hearings, that he was, "…proud of the future of Alaska and…it is important that the oil industry be strong and healthy…." She emphasized the importance of getting the message out to Alaskans that the state is, "open for business".
Minge opened by reporting on his meetings this week with BP’s senior managers, in which corporate strategy was discussed as he attempted to, "…obtain more investment for Alaska". He said he wanted to express his appreciation to the tens of thousands of Alaskans who have, "…stepped up and gotten involved in the effort to improve the business environment and to create more opportunity…."
He said that Governor Sean Parnell has, "…recognized there is a problem and…done something about it…," by introducing HB 110 and complimented non-profits like the Alaska State Chamber of Commerce, Resource Development Council for Alaska and the Alaska.
He went on to say that changes made to the production tax several years ago, "…went too far, and needs to be changed if Alaska is to see the investment levels that should be occurring…." He said a number of potential projects that would be economic elsewhere in the world are not in Alaska. "The only way to offset the decline (in TransAlaska Pipeline throughput)," he said, "is to put more barrels in the pipeline through new investment. … Under the current tax structure the risk-reward balance has shifted too far in favor of the state."
Minge referred to a recent presentation given by Admiral Tom Barratt, President of Alyeska Pipeline Service Company, wherein he noted that the pipeline throughput today, at 640,000 barrels/day, is 60,000 barrels per day less than when the pipeline first began operating. Barrett said a pipeline is like an old car: when the engine light comes on you stop the car to check the oil. When you pull out the dipstick and see the level is down you add oil. Well, when we check the dipstick on the Trans Alaska Pipeline it is below the ‘add oil’ level. The audience spontaneously applauded.
He described the many presentations his company had made before the general public and legislative committees. He said that in those meetings the Legislature and others have learned that the effect of passing the tax reforms contained in HB 110 would be progress on a gas partial processing plant and the drilling of some 50 new wells to access about 8 million barrels of new oil. He said the objective is to focus on ways of developing the huge volumes of oil — up to 5 billion additional barrels — that have already been discovered, but that the jobs resulting from that activity needed a competitive investment climate.
He said, "there are projects in the hopper that I know will work. Aces (the production tax law) has made them uneconomic." He said $5 billion in new investment would be likely in the event tax reform occurred, and that the number could be even higher.
He said that seismic acquisition was critical to finding new oil and that he has authorized $100 million in new seismic acquisition for Point McIntire and Milne Point which, with the passage of HB 110 could produce a massive new drilling program (20-40 exploratory wells).
"I’m willing to risk $100 million on this seismic acquisition program," he said, "in anticipation that the tax law will change."
Conclusion: Frankly, we were fearful that the Alaska North Slope producers would succumb to the socialist siren call from certain Alaskan lawmakers to "provide guarantees that if we g i v e you a tax b r e a k you will spend the savings as we would like". For politicians to blackmail producers into providing a guarantee in exchange for tax reform is reprehensible enough. For private companies to play the game by countering with a bribe, "if you give us a tax break, we’ll conform to your demands", would be worse because it could set precedent for government takeover of capitalism and ring the death toll for free enterprise. Accordingly, we compliment ConocoPhillips and BP Alaska Exploration for both presenting a general and logical view of the beneficial consequences that would very likely follow tax reform, rather than an iron-clad guarantee.
Hopefully, at least a majority of lawmakers will see the light that illuminates an eternal truth: the more you tax something, the less you get of it; the less you tax something, the 
more competitive your market becomes. 
-dh
Point of personal privilege: We were delighted to see a dear friend from our work together thirty years ago with Atlantic Richfield Company, Landon Kelly, accompanied by his daughter Lana. (NGP Photos)
March 14, 2011 Floor Speech of House Speaker Mike Chenault.
MR. SPEAKER:
I AM RELUCTANT TO STEP DOWN FROM THE PODIUM. BUT IN LIGHT OF WHAT HAS OCCURRED – OR NOT OCCURRED – OVER THE PAST WEEK, IT IS MY OBLIGATION AND MY DUTY TO PUT ON THE RECORD IN THIS BODY MY CONCERNS.
AS MANY OF YOU KNOW, THE OTHER BODY HAS IN ITS POSSESSION A CAPITAL BUDGET BILL CLOSING IN FAST ON 2.9 BILLION DOLLARS. THAT’S ABOUT A THIRD OF THE COST OF AN INSTATE GAS PIPELINE – AND ABOUT ONE THIRD OF ALL THE MONEY THE STATE COLLECTS IN A SINGLE YEAR.
TODAY IS THE 87TH DAY OF A 90 DAY SESSION AND WE STILL DO NOT HAVE, IN OUR POSSESSION, THIS 147 PAGE PACKAGE. AND THIS IS JUST THE CAPITAL BUDGET WE’RE TALKING ABOUT. WE STILL HAVEN’T LAID EYES ON THE SUPPLEMENTAL BUDGET, AND DON’T KNOW HOW MUCH MORE SPENDING WILL BE WRAPPED INTO THAT.
IF WE’RE TO ADJOURN SUNDAY NIGHT – LIKE VOTERS SAID WE MUST AFTER 90 DAYS IN SESSION – THESE SPENDING BILLS MUST BE ON THE FLOOR SATURDAY. THAT’S LESS THAN 48 HOURS FROM NOW. THIS MEANS OUR FINANCE COMMITTEE WILL BE LEFT WITH ONLY A DAY TO DO DUE DILIGENCE AND TO TRY TO HEAR FROM ALASKANS ON THIS BILL.
THE OTHER BODY HAS BEEN IN CONTROL OF THIS BUDGET FOR 87 DAYS SO FAR. THE HOUSE HAS NOT HAD AN OPPORTUNITY TO PROVIDE ITS INPUT, AND IN FACT, HADN’T SET EYES ON IT BEFORE THE ROLL-OUT MONDAY. IN CONTRAST, THE HOUSE TRANSMITTED THE
OPERATING BUDGET TO THE OTHER BODY ON THE 10TH OF MARCH.
WE’VE BEEN PUT IN THE POSITION OF HAVING TO ACCEPT – OR NOT ACCEPT – THIS 2.9 BILLION DOLLAR PIECE OF LEGISLATION WITHOUT ADEQUATE TIME TO DO A THOROUGH REVIEW.
THE OTHER BODY HAS MADE IT KNOWN THEY DO NOT HAVE ENOUGH TIME TO ADDRESS LEGISLATION THAT PROVIDES THE LIFE BLOOD OF OUR STATE’S ECONOMY.
THE FAILURE TO ADDRESS THAT ISSUE WILL HAVE SERIOUS CONSEQUENCES FOR FUTURE GENERATIONS OF ALASKANS. NOW WE’RE IN THE POSITION OF HAVING ONLY ONE OR TWO DAYS TO PASS ONE OF THE LARGEST CAPITAL BUDGETS IN THE HISTORY OF THE STATE. WE WILL MAKE THE TIME FOR REAL REVIEW.
IN THE WORDS OF THE PRESIDING OFFICER OF THE OTHER BODY, WE ARE NOT GOING TO BE BULLIED INTO MAKING A RUSHED DECISION ON A $2.9 BILLION CAPITAL SPENDING PLAN. AGAIN, AS HE SAID, ALASKANS DESERVE ELECTED OFFICIALS WHO WILL NOT RUSH INTO A DECISION. I QUOTE – “WE HAVE TO DO THE RESEARCH, GET THE INFORMATION NEEDED, DO OUR DUE DILIGENCE. TAKE OUR FIDUCIARY RESPONSIBILITIES SERIOUSLY.”
I DON’T WANT TO STAY HERE A SINGLE DAY LONGER THAN NECESSARY. BUT I’M NOT ABOUT TO LEAVE UNTIL I KNOW I CAN LOOK MY CONSTITUENTS IN THE EYE. I WANT TO TELL THEM WE HAVE HONORED THE TRUST THEY PLACE IN US TO BE RESPONSIBLE CUSTODIANS OF ALASKA’S FUTURE – AND THAT MEANS ALASKA’S DOLLARS.
I BELIEVE IN THE PROCESS, MR. SPEAKER, AND THIS PROCESS RIGHT NOW IS NOT A GOOD ONE. IT IS BROKEN. I’M DEEPLY DISAPPOINTED THAT WE’VE REACHED THIS POINT, BUT I’M DRAWING THE LINE RIGHT HERE. BEFORE WE SPEND THIS MUCH MONEY, THIS BUDGET WILL RECEIVE THE THOROUGH, RESPONSIBLE VETTING THAT THE PUBLIC DEMANDS AND DESERVES. AND I DON’T CARE HOW LONG THAT TAKES. IF WE CAN’T GET THERE, I’M READY TO LEAVE AT THE END OF 90 DAYS WITHOUT A CAPITAL BUDGET. I HOPE ALL OF YOU ARE READY TO DO THE SAME.
THE PRESIDING OFFICER OF THE OTHER BODY MADE OUR ARGUMENTS FOR US WHEN HE SAID, AND I QUOTE: “THE WORLD DOES NOT COME TO AN END IF WE DO NOT ACT NOW. THE SKY IS NOT GOING TO FALL. LET’S TAKE THE TIME WE NEED TO GET THIS RIGHT. THESE ARE DIFFICULT TIMES WITH BIG DECISIONS AHEAD OF US. LET’S BE CAREFUL, WISE AND JUDICIOUS IN MAKING DECISIONS THAT WILL AFFECT ALASKANS FOR DECADES TO COME.”
WE ALL HAVE DIFFERENT IDEAS OF WHAT GOOD PROCESS IS. YOU ALL KNOW WHERE I STAND ON THAT ONE. WE DON’T NEED MORE LAWS ON THE BOOKS THAT TAKE AWAY THE RIGHTS OF ALASKANS OR TELL THEM WHAT THEY CAN OR CAN’T DO. OTHERS WILL SEE IT DIFFERENTLY. AND THAT IS WHY PROCESS EXISTS – PEOPLE INTRODUCE BILLS. COMMITTEES HEAR BILLS. THEY MAKE AN HONEST EFFORT TO PULL TOGETHER THE INFORMATION THEY NEED TO MAKE SOUND DECISIONS IN THE BEST INTERESTS OF ALASKANS. THEN WE HEAR FROM THE PUBLIC. AND FINALLY, WE VOTE.
BUT WITH THIS BUDGET BILL, THE LACK OF A GOOD, PUBLIC PROCESS BOTHERS ME TO NO END. THE ASSUMPTION THAT THE HOUSE WILL RAM THROUGH THIS $2.9 BILLION DOLLAR BILL WITHOUT SOUND, PUBLIC REVIEW, SHOWS A LACK OF RESPECT TO THE HOUSE AND ALASKANS. TELLING THE HOUSE TO RUSH TO A DECISION WITHOUT THE FACTS IS NOT WORKING, AND WILL NOT WORK. IT’S LIKE THE OTHER BODY TELLING THE HOUSE, “STICK IT.” (or “TAKE IT OR LEAVE IT.”)
I HAVE THE HIGHEST RESPECT FOR MY COLLEAGUES IN THE OTHER BODY, BUT ON THIS ISSUE, THEY ARE DISRESPECTING THE HOUSE AND ALL ALASKANS BY FAILING TO HONOR OUR PROCESS.
PROCESS IS THE CORE OF OUR HOUSE VALUES. I REFUSE TO BE BACKED INTO A POSITION WHERE I CAN’T LOOK ALASKANS IN THE EYE AND TELL THEM I’VE DONE MY JOB RIGHT.
I WILL NOT BE BULLIED. I WILL NOT BE RUSHED. AND I HOPE YOU ALL WILL STAND WITH ME IN DEFENDING THE INTEGRITY OF THIS INSTITUTION AS WE RECOGNIZE IT IN THE HOUSE.
MR. SPEAKER TO THAT END, WITH THE COOPERATION OF ALL OF YOU IN THE HOUSE, I AM ASKING FOR YOUR SUPPORT IN NOT TOLERATING THIS BEHAVIOR BY THE OTHER BODY. I AM ASKING THAT WE REFUSE TO TAKE ACTION ON A CAPITAL BUDGET UNTIL WE’VE HAD THE TIME TO REVIEW IT AND TO ASK THE PUBLIC FOR INPUT. THEN, AND ONLY THEN, SHOULD WE BRING THIS BUDGET TO THE FLOOR.
________________________________________________________________________
Move and ask unanimous consent to speak on an issue of great importance-
Thank you Mr. Majority Leader
The hard thing about being President is to have to listen to the debate and not be able to participate. I appreciate this opportunity.
In the remaining days of this legislative year, I wanted to speak to the most contentious and difficult issue we have faced- That of the Governor’s bill to reduce taxes on the oil industry.
There has not been a more momentous matter for us to deal with in the 11 years I have been in the Legislature. It is of enormous and long lasting importance.
I’m concerned about the fear in my communities. Fear that the pipeline is about to be dismantled. People are scared. Scared to the point of demanding we pass the Governor’s bill before TAPS ceases to exist because they all know that some 90% of our revenues are based on oil taxes.
We need to be careful about using an issue like this to frighten people. Let’s step back and think about this matter of throughput of TAPS.
You know, when someone tells you if you don’t do this right now, the world is coming to an end- that makes you suspicious.
Remember Chicken Little Crying “the sky is falling”? I used to read that to my children as I am sure you did. Act now, without thought or consideration, there is no time to look at the data, at the facts. You are out of time.
I’d ask that we dial it down a notch, to think things through, to consider expert advice. Where is Alaska really in terms of oil taxes as compared to other states and nations?
Let’s take a deep breath and think about it. That’s where the Senate is right now
We respect the Governor and appreciate his good intentions and the attention he is paying to the oil industry. But many of us respectfully disagree with giving away up to 2 billion dollars in oil taxes without knowing what we will get in return.
As for the other body, they barely passed the Governor’s bill. Out of 40 members, if 2 members had changed their vote, It would not have passed. The way the supporters of the Governor’s bill were speaking, I was expecting a near unanimous vote. But nothing like that occurred. It only passed by 2 votes. So clearly there was serious concern by many.
We need to do our homework on such an important piece of legislation. And I don’t believe that has happened so far. Deliberations have not been complete– Critical questions have not been discussed. Not even asked about.
With all due respect, I don’t believe the administration did a particularly good job of introducing the bill. At least in the hearings I attended, a solid case was not made. Many questions went unanswered It was truly, “trust us” and was presented, as I said earlier, with a hope and a wing and a prayer
Governor has said this is a do nothing Senate. I can’t agree with that, again respectfully. Because despite how this may sound, unfortunately, there is no other way to give this talk without referring to the Governor, the Governor’s Administration, and the Governor’s bill.
And I like this governor. I’m glad he is the Governor and I’m glad he introduced this bill so we could discuss it. But the Senate has accomplished a lot-Putting up to 2 billion in savings, writing the capital and operating budgets, considering legislation- not including the many accomplishments we have made in education sending 2 bills to the other body funding K-12- both SB 84 (voc) and SB 97 (20/20). And give the other body the opportunity of deciding which they prefer- plus the success of the Higher Education Task Force
What we have not done, and what I believe the Governor is referring to, is to pass his oil tax bill.
We may be called do nothings, but our interpretation is to do nothing – to harm Alaskans. And his bill could cause considerable harm to many Alaskans. I know that is not the Governor’s goal. I know he believes he is doing the right thing, but there could be unintended consequence of rushing to a decision.
We have many questions that need to be answered, especially in the area of throughput in TAPS. And maybe least of all in what the response of big oil has been. We have read the speech given in Anchorage by Conoco’s Chief Executive saying that if we passed the Governor’s tax relief bill and gave them $2 billion that it is likely they would invest more.
I have the greatest respect for Jim Mulva and appreciate that he is the only Oil Executive to step forward of late and speak his mind. That’s all well and good, but why have they not come and talked to us? Testified to the Resources Committees? Made real commitments?
And where are the other 2 of the big 3 – BP and Exxon? Are we to walk away from $2 billion because one company is likely to take some action? Where are the others? Why are they not testifying here in the Capitol to the legislature? Why are they not putting themselves before us on the record so we can get our questions answered, so we can find out the facts? They are nowhere to be seen this session.
It has been suggested by many that we need a comprehensive cost/benefit analysis. Not a rush job. An issue of such magnitude cries for serious and thoughtful consideration. We have to know the answer on whether we need to give big oil another tax cut. Remember we have already given them up to $2 billion in tax credits which were not used for new exploratory wells, but for maintenance. We need to understand the short and long term cost of this change as well as we can. Then we must determine what the proposed benefits will be and the chance those benefits will occur. Then you calculate the difference.
The result may be more jobs for Alaskans, or more oil in the pipeline, or the possibility that the state may never recover the difference in the tax it gave up due to the legislation.
Even if there is a negative impact and we don’t recover the cost of the change in tax. The state could still decide the change is a reasonable course of action
We could decide that jobs or more oil in the pipeline is worth more than a savings account or capital budget items, or maintaining funding for education, Medicaid, or police protection. Fuel and energy-that would be an acceptable cost benefit analysis.
But what is not acceptable is not counting the costs, saying the costs are not real
The costs are real. They can be determined. What are not real at this point are the proposed benefits from this tax change. They simply cannot be calculated because the oil companies that would benefit from these tax changes have failed come forward.
They say they will decide whether to explore and develop only if we pass the Governor’s oil tax bill. And they will decide sometime in the future whether to explore and develop or not. It might be worth it, but the legislature’s job is to count the costs and fully understand the risk before we make such an important decision.
We have to do the research, get the information needed, do our due diligence. Take our fiduciary responsibilities seriously. Alaskans deserve this from their elected officials. That we not rush to a decision.
It is never inappropriate to return to the constitution, a document we have all sworn to uphold. Of course, anything you read from it is open to interpretation. That’s why we have a State Supreme Court, to figure out what the Constitution means. But in the area of Natural Resources – it seems pretty clear to me. It says we will utilize, develop and conserve the natural resources of our sate for the maximum benefit of its peole.
That is not hard to understand . It does not say for the maximum benefit of big oil. It does not say for the maximum benefit of our state’s banking institutions. It does not say for the maximum benefit of the Chamber of Commerce. It says for the maximum benefit of the people- Our constituents, all of them, young and old, voters and non voters, Republicans and Democrats. That is who the constitution was written for, that is who the constitution protects.
So, the Governor’s bill passed the other body with 2 votes to spare and is now safely in the passion of the Senate.
I referred it to 3 committees which is something I try not to do this close to the end of session. But I had a letter from the Chairman of the Labor and Commerce Committee requesting the bill be sent to his committee as well.
A completely legitimate request since the chair has concerns about labor issues in the bill. Then it goes to Resources and on to Finance. All reasonable and understandable with no games being played- I assure you.
Labor and Commerce needs to be concerned with the conflicting job claims made by the bill’s supporters and detractors.
We hear conflicting stories about more people being hired than ever before to work in the oil field, but we also hear that local, Alaskan companies are seeing low employment. Where is the truth? Who is right? The chair of Labor and Commerce had a hearing on Friday and may move it out if he gets the answers to these important questions.
But there are big questions yet to be answered about labor issues. There are a lot of jobs in Alaska in the oil and gas field. We are near the all time high in employment In 2010 we had 12,800 jobs in oil and gas as reported by the Dept. of Labor. This is only 100 down from the all time high. Its 20% higher than the average of the last 10 years. But unfortunately, the oil industry is not hiring Alaskans as they should. 47.9% of new hires now are being filled by outsiders What is wrong with this picture? Why are these companies not hiring Alaskans? We need some answers.
My charge to our Labor and Commerce Committee is do your job. Send the bill forward to the Resource Committee when you are satisfied with the answers you are getting.
The Governor’s bill has a long ways to go in the time we have left. The real problem, in my estimation, is that we have not been presented adequate information and answers from the administration, from the Department of Labor. There appears to be a lot of skepticism about whether the tax reductions will really trigger new oil production into the pipeline.
I think we all agree that we would like to see more oil in the pipeline, but the Governor’s bill, as it now reads, gives up $2 billion in tax relief to oil companies without firm guarantees to Alaskans that they will look for more oil or that they will hire more Alaskans.
To move ahead on the audit issue, despite the fact that the Administration has not requested it, Over $30 million now in draft budget to pay for needed hardware and software. We are way behind. We have not completed an audit of a single year since the ACES tax returns began. Nothing has been audited since ACES started in 2007. This is another indication that it may be too early to make changes to our current tax system. Let’s get it done. Let’s hire the best and catch up
Many have argued that the pipeline, TAPS, will be shut down if we don’t change the tax. The Governor has clearly said this and many others have implied the same thing. Concerned and frightened Alaskans have e-mailed me. They have asked us to pass the Governor’s bill before the pipeline is torn up and implied that it could happen immediately.
Superior Court Judge Sharon Gleason, just recently named to the federal bench in Alaska . She adjudged a very important case about the value of the pipeline. 5 week trial, 171 page decision, encourage everyone who cares about Alaska to read it. Big question was, how long the pipeline will last? Lots of expert testimony. Blockbuster – the Judge determined that the life of TAPS is at least to 2047.
That is 36 years from now. I have not heard the administration talk about this finding. Gleason Decision was released on Oct 26, 2010, only some 5 months ago. It was BP, Exxon, Conoco, Alyeska Pipeline Service, Fairbanks, Valdez, etc Vs. State of AK. Fairbanks and Valdez believed the TAPS 2006 assessed value should be $12 Billion for tax purposes . The owners, that’s BP, Exxon, Conoco and others believed the TAPS assessed value should be $850 million
Just so you won’t have to wait to the end, the Judge decided it’s value was $10 billion and would cost $18.7 to replace it today.
1st tanker, left Valdez in 1977 . At that time proven reserves 9.6 billion barrels
As of Jan 1 2006, over 15 billion barrels transported through TAPS and more than 7 billion barrels of proven reserves left.So: in 2006 15 billion barrels shipped with 7 billion barrels of proven reserves compared to only 9.6 billion barrels of proven reserves
in 1977.
Judge Gleason determined that TAPS physical life met or exceeded 100 years with proven reserves at least 7 billion barrels
There was Far greater economic value in 2006 than the value of the proven reserves when TAPS began in 1977. Because the oil was worth so much more in 1977 at $50 barrel. Of course today, it could be valued at up to $110 a barrel or higher. TAPS physical life considered virtually unlimited. With surveillance, maintenance, repair, and replacement programs Owners, again BP, Exxon, Conoco and other gave evidence TAPS could function
down to 200,000 barrels day with the installation of heaters. Maybe even down to 150,000 according to Dr. Modisette, but questionable.
Today, DNR is predicting over 600,000 barrels a day will be shipped through TAPS. So the Court found that TAPS can operate at least down to 200,000 . The Physical life of TAPS is virtually unlimited if properly maintained. The court decided there was Sufficient proven reserves
for TAPS to continue to operate until at least 2047. Alyeska in its 2001 federal right of way renewal application said that oil fields servicing TAPS have long, predicable production tails on the charts. So, the life of TAPS is at least 2047. The fact that TAPS could be in operation at least until 2047 was independently confirmed by BP in a Report to the SEC and used by Royalty Trust in its 2006 SEC filing.
BP Alaska projects continued economic production from Prudhoe Bay at declining rate until 2065 another and later date – economic until 2065. Evidence persuasively demonstrated that TAPS was profitable and would be reproduced if it did not presently exist. Value of the reserves in 2006 increased at least 5 fold since 1977 when oil was selling at $10 barrel. Value of remaining proven reserves on North Slope approximately $350 Billion or at today’s prices, if you conservatively say $100 barrel, the proven reserves could be valued $700 billion.
Only means of transporting product to market is TAPS. Clearly, the court said TAPS would be replaced to realize the value of those proven reserves if necessary. If there was not a TAPS today, someone would spend $18.7 billion to access $700 billion in proven reserves.
Value of TAPS $10 billion. Cost $20 billion to replace today. Proven reserves at $50 is $350 billion, at $100 would be $700 billion. If we did not have TAPS it would be worth building a new one someone would spend $20 billion to get at the proven reserves of $700 billion and that is not considering the other opportunities such as shale oil, heavy oil, and Outer Continental Shelf Oil to say nothing of ANWR.
We recognize there are problems with TAPS – with throughput now producing 600,000 barrels a day. But according to the judge it would still operate at 200,000 barrels a day. The Governor wants us to up that to 1 million barrels a day. That’s another discussion we need to have. What is the right amount of throughput? What is best for Alaska? What is best for the US – with the President encouraging domestic production -Instead of imported oil?
Maybe Congress should rethink ANWR. Of course, we are talking about an enormous about of money. $2 billion a year in tax relief to the industry is gigantic Giving that amount of money away would use up our savings in 5 years or so and then what? How would we pay for the services the public wants Lilke Education, Medicaid, Police protection, fuel and energy costs?
We may be called a do nothing Senate. I don’t believe that to be the case. We want to find the right answer, but we will not be bullied into making a $2 billion mistake. We need answers, data, and information. We need the cooperation of the administration- Of the Commissioners and of their departments Telling the Senate to rush to a decision without the facts is not working and will not work.
Helping us to find the right answer will work. Why is all this important? Because citizens are being told TAPS may close down, our oil pipeline may be removed. The Governor said, as reported at his March 24 press conference- “At some point, Aleyeska will have to shut down
the Trans-Alaska Pipeline System.” Do we really want to frighten the public at this point? Threaten them with the closure of TAPS? Where is the truth between what Judge Gleasen has said- That the life of TAPS is virtually unlimited and the Governor’ statement that “At some point” they will have to shut it down? If nothing else, this issue alone needs serious consideration.
I have heard some people suggest that we change oil tax now, then come back in a year or so if it is not working and change it again. That’s really a bad idea, I think, what kind of stability does that give to industry if we change our tax structure from year to year? And it is never easy to change oil taxes. It takes an enormous effort from a lot of people. No, let’s get it right, whatever the answer is, and stick with any new tax structure for a long time to come.
There are certainly things we can work on once we have the information we need. I personally like the idea of reducing progressivity at the high end, but I would like to see how that works out in detail. And the idea of bracketing makes sense to me as well. There are things in the Governor’s bill that I think many Senators can eventually support.
But not now, not without the information we need. Remember the world does not come to an end if we do not act now and pass the Governor’s oil tax bill. The sky is not going to fall. Let’s take the time we need to get this right. These are difficult times with big decisions ahead of us. Let’s be careful, wise, and judicious in making decisions that will affects Alaskans for decades to come.
As you know I’m a retired history professor, so I hope you don’t mind my ending with a little history lesson. I’ve been slowly reading and enjoying Ron Charrow’s new book, “Washington, A Life”. He was a great president, but I think, an even greater General.
Throughout the revolutionary war, both the British and American armies held enemy Prisoners of War. The British regularly executed their POWs but Washington was loath to act in kind. He was pushed from all sides to execute a British officer. Eventually a young captain, named Asgill, was chosen by lot. Washington kept putting it off and refused to be rushed to judgment
Finally he received a personal letter from our Allies, King Louis and Marie Antoinette of France, asking the General to release the British officer for Humanitarian reasons. Washington relented and sent Asgill to the British Admiral, still in New York.
Washington dealt with this issue the way he dealt with many controversies during his presidency. By letting things simmer instead of bringing them to a premature boil. He said he liked to allow things to percolate.
That’s what I think we need to do here, in this instance of the Governor’s oil tax bill. Let matters percolate, let them simmer and not come to a premature boil. We need a lot more information to do our jobs properly. We need the reports from Wood-McKenzie and Van Miers. Unfortunately, we will not receive them until after session. They will show us where Alaska really sits in oil taxes as compared to other states and nations. To make this important decision without that information would be unconscionable on our part.
Let us do our job. Do a real cost benefit analysis of this oil tax. We can find out the costs relatively easily. What we have to know are the benefits.
Not just a hope, a wing and a prayer. Not just a comment from an oil executive in Anchorage that if you give us $2 billion, we are likely to invest more.
We need to pay attention to our constitution and celebrate the fact that our natural resources must benefit all Alaskans.
We need to look at Labor issues and find out why employment in oil and gas is so high, but yet 47% of new hires are not Alaskans.
We need to understand if TAPS is really about to be dismantled or if Judge Gleason is right and the life of TAPS is virtually unlimited. And to remind ourselves that if we did not have a pipeline today, a new one would be built for under $20 billion in order to access $700 billion in proven reserves.
Can we do all of this while still respecting the Industry, the Governor, his administration, Commissioners and the other body? YES.
And finally, I am loath to accept the charge that the Senate is doing nothing. But I will accept the charge that we will do nothing to harm Alaskans.
Thank you Mr. Majority Leader for allowing me to speak.
I have taken up more time than I intended . This is the first time in the past 3 years I have felt the need to step down and speak from the floor. It will likely be the last. I know the members will be glad to see me go back up there, sit down, and be quiet. I hope I have not abused the privilege If so, I apologize.
Thank you
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