3-1-12 - It's Our Oil And We are Sovereign, By Golly!

Calgary Herald by REBECCA PENTY AND YADULLAH HUSSAIN.Ottawa can prevent future oil and gas pipeline projects key to Canada's economy from falling victim to regulatory missteps by overhauling the review process, the C.D. Howe Institute said Wednesday.  The complexities identified in assessment of the Mackenzie Valley, Keystone XL and the Northern Gateway pipelines highlight the need for reforms, the public policy think-tank said in a report.

 Alaska Dispatch by Amanda Coyne.  In a conference call with Alaskans today, former House Speaker and GOP presidential contender Newt Gingrich promised listeners that if elected, he would dismantle the Environmental Protection Agency as well as the Department of Energy, and sign up to 200 executive orders to unlock federal lands in Alaska.   ***    Republican presidential candidate Newt Gingrich on Wednesday told Alaskans that, if elected, he would disassemble the Environmental Protection Agency and sign hundreds of executive orders to open up drilling on Alaska lands with the goal of lowering the price of a gallon of gas to $2.50.   Read more:Fairbanks Daily News-Miner - Gingrich bashes EPA in Alaska conference call  by Max Buxton.

Last night your author told the story below in a speech given to the Anchorage Mid Town Rotary Club describing the current Alaska Legislature and Obama Administration obstacles to improving throughput of the Trans Alaska Pipeline System.  Here is the paper version of that speech.  -dh

It's Our Oil And We are Sovereign, By Golly!

by 

Dave Harbour

Here's as true a story as I can construct from memory for faithful readers.

On Tuesday, I was asked to appear on the Alaska Political Insider television talk show, hosted by long-time respected friends, Dorene Lorenz and Mark Colavecchio (NGP Photos).  The gentle co-hosts were discussing the concept of "Our Oil" during our interview and off-air breaks.  I said that many people misunderstand the responsibility of ownership.  We may "own" the resource but when Alaska issues leases in return for cash bonus dollars and a continuous stream of royalty payments, we have contracted "Our Oil:" to someone else.

"It is a very simple concept that most intelligent citizens understand," I observed to the hosts, "not to be confused with Alaska's taxing policies".  The problem with the Alaska Senate's treatment of Alaska's predatory Production Tax is that it is confiscatory and constantly changing/increasing in recent years.  It changes the rules of the game and ups the ante after the investors have already committed.  It disguises it's true intent to capture unearned income from investors using a camouflaged cloak with the words, "It's Our Oil" written all over it.  It violates any standard or principle of fair treatment.  The tax is not collected for the necessary purposes of government but because some populist politicians incite uneducated voters into believing that because it's "Our Oil" we can keep going back to the well and extracting more cash via taxes after the lease bargain has been made, the leases signed in good faith.  All this is in addition to an existing, discriminatory statewide oil and gas property tax which no one else pays...adding insult to injury.

Now comes another insult to injury, a discriminatory income tax proposal applying to the oil industry--not for the necessary purpose of government but because the money's there.  In sponsoring this effort, Representative Paul Seaton is revisiting a dangerous time in Alaska's history when the Senate by one vote passed a similar, discriminatory income tax and then repealed it while increasing industry severance taxes and eliminating the personal income tax.   Representative Seaton this week characterized the revised income tax as improving government efficiency since it would take only a few state employees to rake in another several hundred million dollars...as if government efficiency and private capital expropriation were a better focus than a sustainable economy enabled by robust investment, more production and a sustainable trans-Alaska pipeline throughput.  The mere fact that in face of diminished Prudhoe production and economic catastrophe he would focus on further alienating and taking advantage of legacy investors is evidence of the state's short sighted and immature leadership.  

(No one objects to reasonable and predictable taxes for the oil industry or anyone else, but a taxing authority, to command respect and encourage investment, should not only seek a fair share for itself but give a fair shake to the taxpayer.  That means predictable tax policy, stable policy, policy that does not discriminate, policy that is never retroactive--unless retroactivity benefits the taxpayer.  A good tax policy would also focus on filling the pipeline, making a sustainable investment climate for our kids; indeed, husbanding our resources as if we were responsible adults who care not just for the need-greed of this generation but for the economic survival of future generations of Alaska's children.)

I offered the television show hosts an analogy during a conversation that occurred on- and off-air, summarized and slightly embellished-upon here.  "A landlord signs a lease with a tenant for an apartment.  The tenant family moves in and becomes happily settled.  One night a year later, the landlord knocks at the door.  He is somewhat of a buffoon, arrogant, emotional and defensive -- wearing a big button on his puffed up chest.  'It's My Apartment," the button says.  "From your viewpoint I am sovereign," he states.  "Yes, I know we signed a lease and you can stay, but I will need you to write me a check for an additional $100 this week.  And I'll need that additional $100 every week in addition to your lease payment.  And, I'm applying this retroactively to January 1, so you can add $800.  Oh, and before I forget, I'll need to use your place Saturday night for a party.  Remember, IT'S MY APARTMENT," he says, proudly pointing to his button, "and to you, I am sovereign."   As the landlord stomps proudly off, the husband turns to his wife with kids looking on, "He may think he's sovereign but he's unfair," Dad  laments, as the two begin their discussion about either moving or obtaining a second job..

The hosts and I agreed that this sort of analogy could be reasonably reflective of Legislators' attitudes of hostility toward our largest investor, the oil industry--and that even we would not invest in such an environment.  Then, just to complete a near-perfect analogy, the hosts' next guest walked in, another old friend, David Gottstein.  He proudly wore a big black and white button on his sport coat, "It's Our Oil". 

ADN by Kim Murphy, LA Times.  Royal Dutch Shell launched an extraordinary pre-emptive legal strike Wednesday against opponents of offshore oil drilling in the Arctic Ocean, filing suit against more than a dozen environmental organizations likely to challenge its plan for drilling exploratory wells in the Chukchi Sea this summer.In a petition for declaratory relief filed in U.S. District Court in Anchorage, the oil giant seeks to have the court rule that the U.S. government complied with federal law when it approved Shell's oil spill response plan for upcoming exploratory well-drilling in the Arctic.  The move is a clear attempt to beat environmental organizations to court and avert potentially costly delays for a project on which Shell has already spent $4 billion without drilling a single well.  The oil company launched a separate petition against Greenpeace, whose activists last week boarded the drilling rig now moored in New Zealand and scheduled to begin drilling in the Arctic in July. Six activists, including television actress Lucy Lawless, climbed the rig before being arrested.  A hearing was under way Wednesday afternoon in federal court in Anchorage on the company's request for a temporary restraining order prohibiting Greenpeace from engaging in "illegal and dangerous actions" tied to the upcoming offshore drilling program.  "This is a very unique legal approach. I'm not sure anything like this has ever been done before," Shell spokeswoman Kelly op de Weegh told the Los Angeles Times.