Archive for the ‘SB21’ Tag

My Turn: Alaskans unaware of their own wealth | Juneau Empire – Alaska’s Capital City Online Newspaper   Leave a comment

My Turn: Alaskans unaware of their own wealth | Juneau Empire – Alaska’s Capital City Online Newspaper.

Posted August 19, 2014 by aurorawatcherak in Alaska

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I Voted YES on Proposition 1   Leave a comment

I felt a little strange doing it.


Originally, I was going to vote No because of my personal principles against taxation, but ….

Even with the Vote No lobby outspending the Vote Yes side by a factor of 10 to 1, I slowly came to the realization that the oil companies were getting a better deal from Alaska under ACES than they are anywhere else in the world. We were paying a $25 production credit on each $100 barrel of oil. Iraq pays $2. Iraq taxes the oil at more than 60%. Alaska under ACES was taxing the oil at 32% at the highest rate of progressivity. Under MAPA (More Alaska Production Act or, alternatively Making Alaska Poor Act), previously known as SB21, we pay a production credit of about $42 on a $100 barrel and we tax at a lower rate. It removes the progressivity of ACES, which means the oil companies have an incentive to keep the price of a barrel of oil high rather than low. Generally, the best way to keep a price of a scarce commodity high is to restrict production.

Under ACES, the oil companies paid more at the higher price, so were actually being incentivized to produce more and drive the cost down.

So, starting with the premise that taxation is always bad, I slowly came around to voting Yes, even though I had to dig to get the information to convince myself.

Alaska is an owner state. We’re not Texas or North Dakota. We’re Iraq. We are the owners of the resources. We have a right to demand a fair share of the profits gleaned from our fields. When the oil companies are making huge profits, the owner of the resource shouldn’t be going bankrupt.

If you saw a Texas landowner with oil derricks on his land living in that shack, you’d think he was being ripped off, right? Well, Alaska is an oil rich state and until this year was the only state in the union with a positive balance sheet. With the institution of MAPA, however, we are in deficit (spending our savings) and if revenue projections continue as estimated, we will be in deficit for the next nine years. We only have about six years worth of savings at current deficits before we have to start tapping the Permanent Fund, which was created as a rainy day fund for when we ran out of oil.

Well, we are nowhere near running out of oil, despite what the media campaigns want us to believe. so we shouldn’t be tapping the Permanent Fund, which is the final step to state bankruptcy.

I voted YES because I think the oil companies are borrowing our resources and they owe us rent.

ACES or MAPA – neither is truly a tax. It’s a payment for access to unbelievable resource wealth.

Posted August 19, 2014 by aurorawatcherak in Alaska

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$13 Million Will Buy a Lot of Fear   Leave a comment

That’s what Rich Seifert wrote.

And, he’s right. The oil companies have spent just about $13 million to blanket the Alaska airwaves and print media with the message that if we vote Yes on Proposition 1 and get rid of SB21 before it bankrupts the state and the people of Alaska along with it, we will see a decline in jobs and a loss of revenue anyway.

I’d believe it if they’d not spent so much money. Something else is driving them. In 2005, these same oil companies used VECO to bribe a half dozen legislators to reduce the oil tax rate. Okay — old news. Except that the oil tax rate was very low in 2005. We’d been operating under the various versions of ELF for a long time and ELF was very much not in Alaska’s interest. It was a huge giveaway to the oil industry, enacted back in the mid-80s when the OPEC countries decided to corner the world oil market by dropping the price per gallon to a ridiculous rate. Alaska offered ELF to keep any production in Alaska and not soon after the OPEC nations began to raise their rates again until — well, it was $9 a barrel in 1985 and now it’s over $100 a barrel. Under ELF, Alaska production was still falling. oil jobs were still declining and the State was able to pay its bills and conservatively fund the Permanent Fun, but we didn’t have anything left over … and there was no sign that it was stimulating production.

But the oil companies wanted the rates lowered even further, and they bribed elected officials to make it happen. They spent about $1 billion to assure themselves a ridiculously low tax rate.

It was that manipulation that brought about ACES in the first place. Alaskans were reminded that it was OUR oil. In addition to a state tax, we have a right to demand a just payment for the use of our resources, just like a landowner in North Dakota or Texas. Under ACES, we were on par with other states once you factored in the lease payments to landowners. But that oil companies want a lower rate.


Well, of course they do. Businesses are supposed to maximize their profits by minimizing their outlays. They’re doing what they should do.

Except ….

Alaska is sitting on an ocean of oil. Contrary to the media campaign, we’re not running out. SB21 offers a low long-term rate that may very well stimulate production, but it will be a windfall that Alaska will not participate in. With the Middle East becoming increasingly frightening, Alaska looks attractive, but it would look more attractive if the oil companies could get the oil virtually for free.

All they have to do is convince us that they’ll walk and go somewhere else if we don’t agree to open our own veins.

Are we over our Abused Colonial Possession Syndrome yet?

Ballot Measure 1: We all have a conflict – Fairbanks Daily News-Miner: Community Perspectives   Leave a comment

Ballot Measure 1: We all have a conflict – Fairbanks Daily News-Miner: Community Perspectives.

The problem with Diane Hutchison’s opinion is that SB21 (MAPA) is essentially the same oil tax regime proposed by the Murkowski administration in 2005. The oil companies then attempted to force Alaskans to accept a rape of our lawful profits from the sale of OUR resources by bribing legislators — seven of whom were found guilty on all charges. Proposing that oil tax scheme cost Murkowski a second term and ushered Sarah Palin (who was always against it) into office. ACES was her signature legislation because she was not afraid of the oil companies, perhaps because her husband worked for them and knew that they weren’t going anywhere as long as there is oil in the ground.

In comes Parnell and he convinces this Legislature to pass SB21 (MAPA), which is just a redo of Murkowski’s failed “reform”.

Ms. Hutchison asks us to trust our legislators. Really? Should we also have trusted the ones that went to jail seven years ago?

No, the shareholders of the corporation have a right to vote and demand full benefit of the resources we’re selling to the oil companies.

Posted August 14, 2014 by aurorawatcherak in Alaska

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Letter: Fiscal certainty works both ways | Juneau Empire – Alaska’s Capital City Online Newspaper   Leave a comment

Letter: Fiscal certainty works both ways | Juneau Empire – Alaska’s Capital City Online Newspaper.

I’m voting “yes” not because I believe Alaska is running out of oil and we need to get our money while we can, but because I think we own the oil and we deserve full dollar, at least comparable to what other oil-producing countries demand and get, for our resource.

Alaska is floating on a sea of oil. The Chukchi reserve alone is 2 1/2 times Prudhoe Bay. ANWR, if we ever figure out how to produce it is equal to Prudhoe. Running out isn’t the problem. Letting the oil companies bankrupt us so that we cannot exercise our state sovereignty is.

We ARE NOT A COLONY! Let’s stop acting like one!

Posted August 11, 2014 by aurorawatcherak in Alaska

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De-Mything Alaska’s Oil Taxes Part 1   Leave a comment

In February 2012, on the cusp of the Alaska Legislature passing SB21, Amanda Coyne and Alex DeMarban, both of the Alaska Dispatch News, ran a series of articles de-mything the claims the oil industry was spreading at the time. Most of what I am writing here is drawn from their articles. These issues are still relevant because Alaskans go to the polls this month to decide the fate of SB21. If we vote “yes” on Proposition 1, SB21 goes away and we revert back to the ACES taxation structure of the Palin era. If we vote “No” on Prop 1 (as the massive oil industry advertising campaign wants us to), we go forward with SB21 and bankrupt the state in about eight years.

That’s according to the Parnell administration’s own estimations, but not to worry, the oil companies have promised us that they will open up new development that will fill our coffers once more. There is no formal contract on that, but they promise …


Myth-busting claims in Alaska’s oil tax debate: Part 1

The Vote No on 1 Coalition argues that Alaska's old tax structure made it less competitive than other oil producing areas in the US and around the world.SB21 lowers taxes on the oil industry in Alaska by about $2 billion a year. That’s a lot of money. Alaskans own the resource. We are the equivalent of a landowner in North Dakota or Texas who leases their land to the oil companies for drilling. The only difference is that we do it through the State of Alaska. In this instance, the State is a land-holding corporation and the residents are the shareholders. As good shareholders, we should understand the issues, but unfortunately, we act more like voters who can be swayed by advertisements.

For the record, anytime an ad campaign floods the airwaves to the point that they shout down the opposition, I get suspicious. The Vote No crowd had me for a while, but then they started sounding desperate and every ad ends with the disclaimed “Major contributers — BP, Exxona nd Conoco Phillips.

Vote Yes - Repeal The GiveawayYeah, I felt manipulated and I had to go out of find out why.

Governor Parnell claims that SB21 will eventually result in an increase of a million barrels of oil down the pipeline. Maybe. There has been an uptick in development this year, but of course, given that it can take years to negotiate a deal on a jack-up rig and clear the environmental hurdles to use it, the chances that this new (barely discernable) increased development is the result of SB21 coming into effect last July — doubtful. There’s no contractual obligation for the oil companies to increase development. There could be — but there isn’t. There’s no guarantee that lower taxes mean more oil. Sean Parnell used to work for Conoco Phillips and will likely work for them again. Suspicious?

In the run up to SB21 and since (the controversy never waned), I’ve seen a lot of charts, grafts, etc. and frankly, even as an informed shareholder, I’m confused. What the heck is a marginal tax rate versus effective rate? Progressivity? Proven reserves? Gross versus profit I understand, but tariff and transportation costs? Okay, I’m dizzy.

The fact is that the idea that lower taxes automatically equals higher production is pure conjecture.

Oil is the lifeblood of the Alaskan economy. Maybe we could diversify, but we haven’t, so let’s be honest that the oil companies have made Alaska as we know it. Libraries, paved roads, and box stores are all largely due to oil. That doesn’t mean we should believe everything the oil companies tell us. We should be fact-checking the propaganda.

Which is what the Alaska Dispatch News did in 2012.

Myth 1: Oil companies are trustworthy business partners.

Sometimes they are, but Exxon fought the fishermen of Prince William Sound for two decades over the Exxon Valdez oil spill. Then there was that corruption scandal in the Alaska Legislature in 2006 that led to the conviction of several lawmakers on bribery charges.

Conoco Phillips, on the website Make Alaska Competitive, said Alaska has the “highest cost structure” of ConocoPhillips’ investments, but in 2011, company officials told analysts that Alaska has “higher-than-average margins”. Which is it? It’s either one or the other, it can’t be both.

Alaska’s constitution requires that Alaska’s resources be managed for the “maximum benefit of its people.”

Alaska v. Amarada Hess was a court case which found that from 1977 to 1992 companies were guilty of “deliberate falsification in computing the price paid to Alaska for its royalty oil” The judge concluded that the State of Alaska was guilty of “inexcusable trustfulness in dealing with the oil companies.”

Trustworthy partners? Well, maybe in the same way that my husky-mix is trustworthy to always find trouble when my back in turned.

Myth 2: Alaska oil companies are taxed 80 to 90 percent.

Anchorage Daily News columnist Paul Jenkins wrote that “Because of ACES, Alaska boasts among the highest marginal tax rates in the world, topping 90 percent when oil prices are high.” This statement can also be found on the Make Alaska Competitive website. It’s misleading.

Under ACES Alaska’s tax rate was not 80-90 percent. Russia, Algeria, Angola and private lands in Texas and Louisiana have a tax rate that high, but Alaska’s tax regime under ACES doesn’t even come close to those. On a $100 barrel of oil, Alaska taxed the oil company about $40 (or 40%).

This is where the marginal tax rate comes in. As income rises, so does the tax rate. So if the price of oil increases to outlandish amounts (hard to believe we now think of $100 a barrel as normal), the tax rate goes up, but we’re not there yet. The effective tax rate is really what’s important, but you don’t hear about that in the Alaska tax reform debates. Alaska taxes on profit and allows a hefty write-off — about $27 dollars a barrel under ACES, for what they pay to produce and transport oil. (ConocoPhillips actually claims it’s about $15, which brings up that question of trustworthiness again). So a 53% tax rate is levied on about $73 for a $100 barrel of oil. The oil companies keep $22.50, the federal government takes about $12.50 and the state gets about $39 from all taxes and royalties included.

I’m Voting YES because you’re annoying the CRAP out of me!   Leave a comment

Do you hear that BP, Exxon and ConocoPhillips?

I’m playing a relaxing puzzle game that doesn’t even require Internet and a message flashes across the screen “Give oil tax reform a chance. Vote no oon1.”

NO! I won”t! I rrefuse! If tomorrow, you sign an iron-clad contract to build the natural gas pipeline with a completion date of 2016, I might change my mind, but nothing short of that will fix this! Your ad campaign smacks of desperation and I am no longer falling for it!!!!

Posted August 1, 2014 by aurorawatcherak in Alaska

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Big Oil will stay as long as there’s money to be made   Leave a comment

Letter: Big Oil will stay as long as there’s money to be made | Juneau Empire – Alaska’s Capital City Online Newspaper.

There are many good points being made on this debate right now, so I’m highlighting them.

For those outside of Alaska, this issue will be voted on August 19. SB21 was Governor Parnell’s oil tax reduction plan, which I was opposed to. I favored the Palin-era ACES tax system. When the petition came around to repeal it, however, I opted for stability in the tax environment. I have since changed my mind because I believe Alaska is suffering from abused colony syndrome, whereby we continually forget that it is OUR oil and therefore, we have a right to act like a North Dakota landowner and demand a premium for access to our resources. And, in the end, under ACES (which the taxation system will revert to if SB21 is set aside) the oil companies are still taking home a tidy profit of around 49% AFTER they deduct the cost of producing the oil.

My Turn: Be careful what you vote for | JE   1 comment

My Turn: Be careful what you vote for | Juneau Empire – Alaska’s Capital City Online Newspaper.

I guess this is as good as time as any to announce that I’ve changed my own position on Proposition 1. I was going to vote “No” because I support reduced taxes as a rule.

Sometimes a second look at things makes us question our presuppositions.

I’ve explained before that Alaska is an owner-state. The people of Alaska own their resources in common and the State of Alaska administers them for maximum benefit to the citizens of Alaska. At least, that’s what our constitution says. Think of Alaska as a corporation, the Legislature as the Board of Directors, the Governor as the CEO and the people as the shareholders.

If this were North Dakota, the oil companies would be negotiating with the landowners over a payment scheme. If this were Kuwait, the oil companies would be negotiating with the emirs over a payment scheme. Under ACES, the oil companies were paying about about the same revenues to the State of Alaska as they were paying to other landowners around the world, but they were making considerably higher profits. British Petroleum is not required to publish its profits statements because they are a multinational corporation, but Conoco Phillips is. We know from their statements that Alaska is considerably more profitable for them than their other American fields and somewhat more profitable than their overseas fields.

In other words, Alaska is still the golden goose that laid the golden egg, but we are told by Sean Parnell, a former oil company executive, that we are not and we believe it.

In 2009, BP won the right to produce Iraq’s largest oil field — Rumalila. The field was producing a little more than 900,000 barrels a day. Iraq pays BP for actual costs for managing the original production. The contract requires BP to raise daily production to make a profit. BP was the original developer of the Rumalia field. Iraq booted them in 1953 for taking too much of the profit. BP returned in 2003, asking to resume pumping for $4 a barrel and Iraq said no. Iraq was unwilling to pay BP $4 a barrel to produce the field. BP then counter-offered  for $2 a barrel (half the price) and Iraq agreed, but only on condition of increased production.

Under ACES, Alaska paid BP $28 a barrel. Under SB21, net profits are expected to be around $40 a barrel. But BP will not give us a promise of increased production. They claim that the North Slope is just too expensive to operate, but in fact, BP hasn’t spent a dime on Prudhoe Bay since 1977. Proceeds from BP’s then-52 percent ownership of leases repaid 100% of BP’s Prudhoe Bay investments by 1982. It’s been all profits since then.

BP Exploration Alaska collects the profits from Prudhoe Bay, reinvests as necessary to keep the field productive, pays Alaska a tiny fraction of the taxes it would pay for the same opportunity in any other country, and sends the rest to London.

In 2006, then-Governor Frank Murkowski pushed a tax-reduction plan through the Legislature, with VECO and other entities greasing the skids with bribes. We fired him as Governor and replaced him with Sarah Palin, who gave us ACES, instead. It was a fair taxation system lacking only a demand for new exploration and increased production. Now Sean Parnell comes through with SB21, that is essentially a carbon-copy of Murkowski’s plan. It will bankrupt the state within eight years and does not hold any demand for new exploration and increased production.

I’m voting yes on Prop 1. There is already a plan in place to replace SB21 with an ACES-like structure with that missing demand for new production.

Sometimes, a principle — like, lower taxes are good — is not always true in every situation. Alaska is a landowner, not just a government and as such, we should be treated with the respect due a landowner.

They’re our resources, and BP et al needs to pay us a fair price for them … like they do in Iraq and North Dakota.

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