Yesterday's Great Oil Tax Debate. Alaska Dispatch Story by Alex DeMarban. Doug Smith (NGP Photo-R below), president and CEO of oilfield subcontractor Little Red Services, said after the debate he was concerned to see both sides misuse data. But Bill Wielechowski (NGP Photo-L above) seemed to do most of the misusing, by relying excessively on outdated information, Smith said. ... Malcolm Roberts (NGP Photo-L below), a member of a group called Backbone that opposes Senate Bill 21, said Halcro never rebutted many of Wielechowski's arguments. Roberts took issue with a key point offered by Andrew Halcro (NGP Photo-R above), who had blasted Wielechowski for failing to mention that massive overspending by the state will soon put the treasury in negative territory. (Fairbanks News Miner/AP version.)
|The House Natural Resources Subcommittee on Energy And Mineral Resources will conduct hearings on how America can pursue an "all of the above" energy policy on federal lands.|
The US Senate Committee on Energy and Natural Resources tells us that, "On Thursday, March 7 (Dirksen 366 at 10 a.m.), the full Energy and Natural Resources Committee will hold a hearing to consider the nomination of Sally Jewell to be the new Secretary of the Interior. This is the first nomination hearing under the leadership of Chairman Ron Wyden (NGP Photo), D-Ore. The Administration announced its decision to nominate Jewell earlier this month.
Sacramento Bee. Speaking at the "Fuelling the Future: Global Opportunities for LNG in BC" conference in Vancouver, Jim Prentice (NGP Photo) told the audience that there is momentum in the right direction for success in the LNG sector. "Everything is happening. Progress is being made on essential regulatory issues. Pipeline routes in from the gas fields are taking shape. Competition is mounting. Opportunity is emerging," said Mr. Prentice.
WASHINGTON, D.C. – The House Natural Resources Subcommittee on Energy and Mineral Resources will launch a series of hearings next month to examine how a true all-of-the-above American energy production plan on federal lands and waters can help create jobs and lower prices.
Anchorage Chamber of Commerce: Andrew Halcro (NGP Photo-L), president of the Anchorage Chamber of Commerce, and Alaska Senator Bill Wielechowski (NGP Photo) will debate oil tax reform at the “Make it Monday” forum today, held at noon on February 25 at the Dena’ina Center. -dh
The Alaska House of Representatives Resources Committee will today consider HB 72, the Oil and Gas Production Tax...and the Senate Resources Committee will consider SB 21, another bill designed to improve Alaska's investment climate. -dh
Calgary Herald. Cequence Energy Ltd. (TSX:CQE) has agreed to swap a property plus about five per cent of its equity to acquire certain oil and gas interests in Alberta from Donnybrook Energy Inc.
On Friday, Alaska Governor Sean Parnell (NGP Photo-L), Mississippi Governor Phil Bryant (NGP Photo-R), North Carolina Governor Pat McCrory, and Virginia Secretary of Natural Resources Doug Domenech, on behalf of Virginia Governor Bob McDonnell, met to discuss progress being made on a revenue sharing proposal for energy development in the outer continental shelf (OCS), and other policy proposals. The coalition adopted bylaws and agreed to work together to advance revenue sharing, and encourage the Obama administration to ensure a more consistent and efficient permitting regime.
“As chair of this coalition of coastal governors, I am pleased Congress is now taking a serious look at legislation that would share federal revenues from OCS energy development, whether it is from oil, gas, wind or tidal sources,” Governor Parnell said. “In a challenging economic environment, with tightened budgets on both state and federal levels, such new revenues would be a welcome option to not only reduce deficits, but to create much-needed jobs and put our nation on a path toward energy independence.”
Since its formation in 2011, the coalition of coastal governors has advocated for energy expansion through responsible resource development, and has supported proactive offshore energy production as part of a comprehensive national energy policy. The coalition provides a discussion and policy platform for offshore energy issues shared by the coastal states and the federal government. The governors of Alaska, Louisiana, Texas, Virginia, Mississippi, Alabama, South Carolina, and North Carolina are members.
Anchorage Chamber of Commerce: Andrew Halcro (NGP Photo-L), president of the Anchorage Chamber of Commerce, and Alaska Senator Bill Wielechowski (NGP Photo) have agreed to publicly debate oil tax reform at the next “Make it Monday” forum, held at noon on February 25 at the Dena’ina Center.
Calgary Herald: Alberta Premier Alison Redford says she is heading to Washington this weekend to lobby for the Keystone XL pipeline and she remains confident it will be approved.
U.S.Congressman Doc Hastings (NGP Photo) goes to bat for Alaska and the Nation, blasting Obama's regime for locking up America's National Petroleum Reserve-Alaska. -dh
Fairbanks News Miner. Federal spending and resource development drive much of Alaska's economy but both are threatened as perhaps never before, Alaska's senior U.S. senator said Thursday. Sen. Lisa Murkowski (NGP Photo), in an annual address to the Alaska Legislature, said years of deficit spending have generated unprecedented debt that jeopardizes the federal government's ability to meet its obligations. At the same time, she said years of government overreach have limited access to resource development in the state, which could help reduce Alaska's reliance on federal funds. ... She said the fastest progress on the energy front can be made at the state level but also spoke to the U.S. energy plan she recently released. (See our earlier story and link to Senator Murkowski's Energy Plan. -dh)
|PR 13-026 Governor Parnell Welcomes NC Governor McCrory to OCS Coalition 022213.pdf
78K View Download
Consumer Energy Alliance Friday Links:
|Our friends at Arctic Power have asked our readers to take the time to sign a petition supporting the opening of ANWR's Coastal Plain to Congressionally authorized oil and gas exploration. We agree! We also suggest that any American citizen or lawmaker who does not sign this petition cannot be serious about improving Alaska North Slope energy production. - dh|
A reorganization at Talisman Energy has resulted in layoffs for 90 Calgary employees, the company announced yesterday. The company has been hinting job reductions for months and said in a news release the move was largely made because of low North American natural gas prices, "which have resulted in Talisman significantly reducing spending on dry gas plays." Read more here.
Utility Products: 5 energy policy solutions to grow economy **Op-ed by David Holt (NGP Photo). The good news is that the state of the U.S. consumer is resting on a strong foundation.
Clay Today: Agriculture and Energy Affect Us All **Op-ed by Kevin Doyle
When we look at the modern skyline and suburban development of so many Florida cities, it’s easy to forget that ours is also a substantially agricultural state.
House Republicans said building the Keystone XL oil pipeline would protect U.S. consumers from higher prices at the gasoline pump.
Houston Chronicle: Senate Democrat touts support for Keystone XL As the Obama administration prepares to issue a final verdict on the Keystone XL pipeline, Democratic Sen. Mary Landrieu on Wednesday emphasized her support for the controversial project.
Politico Pro: McCarthy, Moniz top picks for EPA, DOE Environmental Protection Agency air chief Gina McCarthy and former Clinton Energy undersecretary Ernest Moniz are still seen as clear favorites to help lead President Barack Obama’s energy and environment team, but the official announcements may not be imminent, sources tell POLITICO.
San Antonio Express-News: Energy to help Texas economy outpace nation’s The flourishing energy sector along with across-the-board private sector hiring will keep Texas’ economic growth moving faster than the nation’s, an economist with the Federal Reserve Bank of Dallas predicted Wednesday.
Should Alaska Reform Its Predatory Production Tax and Improve Its Investment Climate? Duh?
Yesterday was part two (i.e. video archive coming tomorrow) of an Alaska State Senate Resources Committee hearing that began on Monday (i.e. video archive) and the overwhelming number of witnesses supported oil tax reform. Witnesses cited example after example of the State's declining economy due to falling oil investments that could sustain a vibrant economy, were Alaska's tax policies competitive with other oil investment areas.
The bill attracting the widespread testimony had been earlier introduced by Governor Sean Parnell (NGP Photo), SB 21. SB 21 is designed to improve Alaska's investment climate and oil production by reforming the petroleum production tax (i.e. severance tax). We offered testimony (reprinted below) designed to provide lawmakers with a brief historical perspective of Alaska's oil tax regime.
Most agreed that the Trans Alaska Pipeline System (TAPS), which once transported over 2 million barrels of oil per day was now on a path leading to extinction. This is because the 800 mile long, 48" pipeline is nearly 3/4 empty, averaging a little over 500,000 barrels/day but declining at an annual rate of about 7%. While Alaska once provided the country with 20% of its domestically produced oil and was the top producing state, it now delivers less than 10% of domestic production and is being left in the dust by competing producers: North Dakota, Texas, California ... with Oklahoma and other states coming on stronger and stronger.
Alaska is in a particularly precarious position because -- unlike other producing states -- its governmental revenue sources are limited and undiversified. Some tax revenue flows into the State's coffers from tourism, commercial fishing, mining, and timber--and from permitting and other regulatory fees. However, those sources are insignificant when compared with the 90% of Alaska's operating budget nourished by oil taxes and royalties. Since Alaska is both among the highest cost oil producing areas and the highest taxing jurisdictions, it will continue to see investment flee to friendlier venues until it improves the investment climate. One witness said Alaska was like an unattractive date, wondering why no one wanted to dance with her.
As we said in our testimony, Alaska once had a stable investment climate that led to widespread prosperity for two decades. Then, two governors, during the last decade, began to tinker with a more complex net profit system for extracting severance taxes, moving away from the simpler, 15% gross tax on production, offset for declining productivity of older fields. With that big barn door opened, legislators piled on, increasing the net profit production tax rate and adding a predatory, progressivity feature that significantly removed investment incentive.
Steve Pratt (NGP Photo) of Consumer Energy Alliance - Alaska provided testimony on Monday that pretty well summarized the general message in support of tax reform as did citizens representing chambers of commerce, some labor unions (i.e. though some labor witnesses oppose tax reform), small business owners representing the 40 thousand employees that directly support the oil industry, and others.
Yesterday, oil industry experts testified. BP described the little known problems in administering, calculating and auditing Alaska's complex production tax regime. ConocoPhillips emphasized the importance of treating all oil investments equally, in such a way that government did not pick with its tax policies, winners and losers. It said, and the other companies agreed, that the Prudhoe Bay and Kuparuk legacy fields could provide the greatest production increases if treated fairly. ExxonMobil assured lawmakers that incremental improvement in tax policy would positively affect incremental investment decisions.
One witness who identified himself as the Chief of Staff of a former governor advocated that lawmakers, "bring in the CEOs" of the top three producers to "negotiate" a tax rate with them. We are astounded at the absurdity of that suggestion. While CEOs have voluntarily come to the state in the past to personally interact with governors and even to negotiate individual issues, no CEO is in a position to 'negotiate' what his company will 'do for Alaska' in return for tax reform. This is because CEOs work at the pleasure of Boards of Directors representing shareholders. From time to time, their policies will changes based on changing conditions. It would be foolhardy and a blow to the free enterprise system if government officials begin thinking that they can 'bring in CEOs' to 'negotiate' quid pro quos in return for tax action. As ExxonMobil testified, government will set tax policy and investors will react to that policy. To suggest otherwise is to further isolate Alaska from investors and make the investment climate even more opaque. Using this line of logic, one is left wondering why this supposedly astute, former chief of staff didn't urge the legislature to guarantee certain benefits to the oil industry when it retroactively enacted today's predatory production tax.
On a related note, one legislator asked if the tax 'take' should be a certain percentage of total production revenue. In 1981, lawmakers and industry did agree on a general split, made easier by the large volume of production and the relatively smaller demand by the state for cash. Rather than an inflexible, formulary percent, today's lawmakers could simply remember this: the higher the costs (i.e. including taxes) the lower the investment. Today's strategy is probably best served by calculating a tax burden that makes Alaska competitive with other oil producing jurisdictions.
In the past, legislators have had nearly endless discussions with consultants about, "taxing to the tipping point". That concept is fraught with danger. Having government discuss how it can tax you almost to death without actually killing you is not an incentive for you to invest in that government. Even if the idea weren't bad on the face of it, implementing a 'tipping point' would be impossible, for different producers have differing producing real estate properties with different cost structures with different organizations and varying investment policies.
Alaska's oil tax policies have demonstrably resulted in declining production that threatens the viability of Alaska's economy. That policy, was put into place retroactively and made investors prey to a predatory government.
Alaskans now appear to be increasingly concerned about falling production. There seems to be a growing consensus that the state should reform its oil tax structure to attract more investment. To this consensus, we say, "duh". The handwriting has been on the wall for many years and now that economic catastrophe is fully within view, action may be imminent. Since a changed investment climate will take years to result in investment flows, we can only urge lawmakers to make changes quickly.
There are two more things that can be done.
First, Alaska tax policy affects production on Alaska lands. The majority of real estate surrounding Prudhoe Bay (i.e. ANWR, OCS, NPR-A, etc.) is under federal control. Legislators and citizens need to also be supporting Governor Parnell's efforts to fight overreaching, arbitrary and capricious federal efforts to slow or stop energy developments in the state. We need to be testifying at federal hearings and signing petitions such as the ANWR link noted above.
Second, just as we encourage Alaska to design tax policy that is competitive with other oil producing areas, so do we urge lawmakers to focus equal attention on government spending. Just as the Fraser Institute provides statistical evidence of Alaska's oil investment competitiveness, so should the Legislature acquire statistics on Alaska's status as a magnet, welfare state. By acquiring statistics reflecting Alaska's tax policy and its spend policy status among other states, the State can most effectively pass onto its next generation a government that attracts prosperity by living, sustainably, within its means.
Fairbanks News Miner by Dermot Cole. The discussion of the $1 billion per year Alaska oil tax credit system suffers from an incomplete look at the statistics.
Calgary Herald/Vancouver Sun by Gordon Hamilton. The Canadian oil and gas industry is asking Ottawa for subsidies that could be worth $2 billion in tax savings to encourage the development of liquefied natural gas plants in British Columbia.
|Next Week's Alaska Senate Resources Committee Hearings Here!|
|Executive Director, Jim Egan (NGP Photo), tells us that today's Commonwealth North meeting at noon in Anchorage: 2525 C St., will feature Apache Alaska Corp General Manager, John Hendrix.|
Fairbanks News Miner/AP. A Senate panel said Thursday that Alaska's oil tax system likely helped advance the decline of oil production in the state, but it expressed misgivings with Gov. Sean Parnell's approach to addressing the issue.
A Tale of Two Secretaries
You Decide: How Could They Affect North America's Energy Future?
HOUSTON, TX – Today, Consumer Energy Alliance transmitted a letter to the newly confirmed Secretary of State John Kerry in which the organization underscores the importance of the proposed Keystone XL pipeline for economic and energy security. While the letter notes that the pending presidential permit for the pipeline is “among the most politically divisive issues that the Department of State will face this year,” the letter also outlines a series of arguments in support of the project. Of note, CEA believes the Keystone XL pipeline is part of a movement toward North American energy self-sufficiency, a transition which will strengthen the secretary’s position as a diplomat representing U.S. interests abroad.
Consumer Energy Alliance President David Holt (NGP Photo) writes:
“Keystone XL is part of a broader transition toward North American energy self-sufficiency – a revolution that will have profound effects on U.S. foreign relations and global geopolitics. Increased supplies of North American oil and natural gas coupled with greater adoption of energy efficiency, conservation, and renewable energy can eliminate the need for foreign imports within this decade.
Wall Street Journal, by Kimberley A. Strassel (Photo). In naming Sally Jewell as Interior secretary, President Obama lauded the REI boss as a woman who "knows the link between conservation and good jobs." ....
The press is just wild about Sally, feting the president's nominee as everything to everybody. She's never held office. She's the CEO of a successful outdoor retailer. She's a woman. She started as an oil company engineer. She is a "committed conservationist." What's not to love?
Far from a creative choice, Ms. Jewell is just the newest addition to Mr. Obama's second-term team of loyal ideologues. It is in fact Ms. Jewell's (relatively unknown) history on the environmental fringe, and her liberal policy prescriptions, that surely made this an easy Obama call. The president knows he can rely on Ms. Jewell to do for the federal government exactly what she's done at an activist level: Lock up land, target industries, kill traditional jobs.