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We’re
here
Walking into the special session on oil
taxes is, for me, like walking into a bar fight that’s already in
progress. Everybody’s had w-a-y more to drink than you have and
they’ve already chosen up sides and started slugging. I suppose that’s
inevitable. Forty-seven of the 60 legislators just did oil taxes last year,
in a regular session and two special sessions. So the scars are still
fresh. They aren’t happy to be back here doing that again. Somebody
described it like being in the movie “Groundhog Day,” in which
Bill Murray had to relive the same day over and over again until he got it
right.
I sympathize, but the fact is that was
then and this is now. I hope my colleagues will be able to face the new
questions in front of us on their merits, and not treat them as simply a
continuation of last year’s donnybrook. I hope that, but I
don’t expect it.
The Experts
Speak
As a powerful member of the powerful Legislative Budget and Audit
Committee, I spent eight hours with Dr. Pedro Van Meurs
and Daniel Johnston
on Thursday. They were two of the main consultants on the writing of the
current Petroleum Profits Tax. And I took away a couple of things I think
are important.
First, the state of
Alaska can increase its taxes without
affecting oil industry investment. Our “government take”
– the part of oil profits the federal and state governments get
– is somewhere in the 60 percent range. Lots of countries take 90
percent or more of profits and the industry still invests there. So this
simple-minded threat the industry is using – raise our taxes and
we’ll invest less – is just that, a threat.
Neither Van Meurs nor Johnston said we should increase taxes. Just that we could increase taxes without sending
Exxon off to invest its spare change in
Libya or wherever.
Second, that there is no reason we
couldn’t have a two-tiered tax policy, one tax for the big, producing
fields and another for exploration and development.
Third, that it’s possible –
maybe even easy – to let the industry have too much money as an incentive to invest. The companies
might have made the investment anyway, and what we give them is just gravy.
Or we may offer so much incentive to invest that they do things they
shouldn’t to lower their taxes – so called “gold
plating.”
So, at least according to these
consultants, we could have different and higher oil production taxes than
we do, and maybe should because we’re not getting anything for the
money we’re leaving on the table.
Finally, it’s becoming clear that
the decision on taxation can’t be made objectively, because we just
don’t know enough – enough about how the industry makes
investment decisions, about what, say, leaving $500 million a year on the
table gets us, about what the future holds. I’m disappointed about
that, because I’d prefer a nice, clean you-do-this-and-you-get-that
decision on a big, important issue. But I’m not surprised we
don’t have that. The truth is we’re all guessing. Some guesses
might be better informed than others, but they’re guesses just the
same.
The
committee starts
We start this afternoon in the powerful
House Special Committee
on Oil & Gas, of which I am a powerful member. We’re the
House’s first cut at the oil production tax, and according to the
schedule I’ve got we’re going to be working every day until we
send the bill along to the next committee. Just like the AGIA bill, we’re not
going to have the time to dot every I and cross every T before we have to
move the bill. But, hopefully, we can improve it.
What’s
going to happen?
Nobody knows really. But if somebody was
holding the last doughnut hostage, here’s what I’d guess to get
it released into my care.
There are a number of legislators who
don’t want to change the current
tax. They say it’s too soon to make changes, that investment is
more important than getting more money for the government and so on. Their
play is going to be to try to pass just the parts of the governor’s
proposal that deal with things like auditors and information sharing, but
not change the tax itself.
There are a number of legislators who like
the governor’s proposal,
as is where is.
There are a number of legislators who want
to change the form of the tax and, maybe, get more money. They say a net
tax is too easy for the oil companies to game, that a gross tax will work
just fine, at least on the big, producing fields, and so on.
There are a few legislators who
don’t know what to think yet.
(I’m in group four, trending toward
group 3. I haven’t heard anything so far that makes me think we
shouldn’t raise oil taxes. I’m of the opinion that if we can,
we should, and then save the surplus because we’ll need it soon
enough.)
It doesn’t look like any of the
groups that have a position have enough votes to pass their plan in the
House and the Senate. So two of them are probably going to have to get
together to make anything happen. The group that’s most capable of
moving enough to do that is the governor’s group, because the
governor can make a decision and make it stick. I’m not saying there
are legislators who will just rubber-stamp whatever she puts in front of
them, but it’s clear that there are legislators who support her and
are inclined to follow her. So, at least right now, it looks to me like the
ball is in Sarah Palin’s court.
Oil
industry lobbying
Here’s a new wrinkle in the oil
industry’s attempts to pay the state as little as possible in oil
taxes. They are apparently recruiting friends and constituents of
legislators to call them up and tell them not to change the tax. I
haven’t had any of those conversations yet– can it be that the industry
doesn’t have that many allies in Spenard? – but I expect I
will. I’m looking forward to them, as soon as my schedule lets up
enough to make and take telephone calls.
Bumfuzzled?
Who’s bumfuzzled?
I am, or I was, yesterday when Van Meurs
said Alaska
has a reputation in the oil patch for being confrontational. Here’s
the exchange as it was reported in the Anchorage Daily News:
Anchorage
Democratic Rep. Mike Dorgan said he was "bumfuzzled" by Van
Meurs' statement that Alaska
is considered too confrontational with the oil industry.
"Is
the problem that we're striking Exxon Mobil's fists too vigorously with our
face?" he asked.
Now people are asking me what “bumfuzzled”
means. To be honest, I haven’t been able to find it in the
dictionary, but I believe it’s a word and that it means confused or
perplexed. And I am. We’re confrontational? What’s that make
the industry, with its lap dogs running
insulting ads and its spokespeople giving us daily doses of “my way
or the highway?”
More to come. Stay tuned.
Regards,
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