Governor's trip to Norway and UK unwittingly confirms criticisms of oil tax giveaway says ADP
May 03, 2013
According to a news release, the governor’s meetings examined the real world, positive effects that tax changes are having in North Sea operations so Alaskans know better what to expect from new oil field investment under Alaska’s new oil tax regime. Looking for ways to recover from more than a decade of declining production, the United Kingdom recently reformed its oil tax structure to bring on new production. As a result, substantially higher levels of investment have flowed to the United Kingdom’s North Sea oil and gas operations.
“The UK is seeing the real results of tax reform – billions of dollars in new investment and job opportunities,” Governor Parnell said. “Like the UK, we have positioned Alaska for an oil production comeback by making our state more competitive. Alaska has already seen encouraging steps toward more production and new investment with recent announcements from Conoco and Repsol.”
During his recent trip, Governor Parnell discussed fiscal and tax policy with officials from BP Norway, Statoil, and BP North Sea, and met in Scotland with oil field service company personnel, university professors on tax policy, and public sector authorities.
However, the Alaska Democratic Party said in a news release, Parnell's trip to Norway and the United Kingdom unwittingly confirmed criticisms of SB 21. Unlike the Parnell giveaway, Great Britain only offers development incentives for new oil, not existing legacy fields. Norway charges oil companies higher prices to extract oil and has built a larger Permanent Fund than Alaska's in less time said the Alaska Democratic Party.
"Norway and Great Britain illustrate why the oil giveaway is bad for Alaska," said Mike Wenstrup, Chair of the Alaska Democratic Party. "Parnell ignored the Norway model of saving oil revenue and the British model of focusing incentives on new oil production."
According to the Alaska Democratic Party, Norway reaps 78% of profits from oil production. Before SB 21 passed, Alaska received approximately 68-72% of profits based on recent oil prices; now we receive less. By charging oil companies more for the privilege of oil extraction, Norway has built a $700 billion Permanent Fund in less time than it took Alaska to create a $46 billion Permanent Fund. In addition, Norway invests directly in new oil exploration. Democratic Senators proposed such direct investment with SB 50, and Senator French offered an amendment to SB 21 which would have established it. Senate Republicans rejected these proposals in favor of money-for-nothing giveaways for existing oil from legacy fields.
According to a news release from the Alaska Democratic Party, following his recent trip, Parnell claimed Alaska should emulate Great Britain's oil price structure. In fact the ADP said, Great Britain only cut prices paid by oil companies for new oil. Under the British system, companies must apply for the credit and explain how they are increasing production. In contrast, oil companies get money for doing nothing under SB 21, which not only lacks incentives for new oil but also gives away money even if oil companies produce less of it.
Governor Parnell had planned to also represent Alaska at the European Seafood Expo in Brussels. However, the governor postponed his trip to attend a memorial service in Alaska. Commerce, Community, and Economic Development Commissioner Susan Bell, First Lady Sandy Parnell, and International Trade Director Cindy Sims attended the expo in support of Alaska’s fishing and seafood industries.
Edited by Mary Kauffman, SitNews
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