Viewpoints: Letters / Opinions
Part 8: OIL COMPANY” WALKER, “OIL CAN” ORTIZ,
By David G Hanger
AND OIL COMPANY SOCIALISM
May 17, 2016
For the first quarter of 2016 ConocoPhillips recently announced a loss of $1.5 billion on its worldwide operations. While it is somewhat reasonable to assume the remaining three quarters of 2016 will be better, estimates about oil prices throughout the remainder of this year still run from a low of $20 to a high of about $80. So it remains possible that overall ConocoPhillips will lose even more on its worldwide operations by the end of this year.
ALL OF THAT WORLDWIDE RED INK THEY INTEND TO WRITE OFF AGAINST THEIR ALASKA INCOME DESPITE THE FACT THAT EVEN AT $26 A BARREL THE OIL COMPANIES WERE INCREASING DAILY PRODUCTION IN ALASKA AND DECREASING PRODUCTION EVERYWHERE ELSE ON THE PLANET.
For decades there has been considerable conjecture about the cost of production of the oil companies on the North Slope, etc. Their own actions tell us beyond any real doubt that they are still making money hand over fist even if the price of oil drops, as it did for a short time, to $26 a barrel. Thus it is safe to say at this juncture that their production cost is somewhere between $20 and $25 a barrel, if not less. In combination with the tax benefits and credits so generously provided by the “Coghill Abomination” the oil companies continue to produce and to profit at $26 a barrel.
Thus for 2016 based on current averages gross profits between $7.5 and $8 billion will be realized on the sale of purloined Alaska oil, on which the net profits realized by the oil companies will be somewhere between $2.8 and $4 billion.
Kara Moriarty, President and CEO of the Alaska Oil and Gas Association, i.e. the semi-hot blonde who shills for the oil companies and lies through her teeth every time she opens her mouth, claims in classic woebegone fashion that the oil companies just can’t make it without money from your wallet, too. They are losing billions of dollars a year here in Alaska. By the time one integrates losses from all over the world, massive purchases of new equipment with the windfall net profits they have realized in the past three years, sure, it is easy for any accountant to generate losses. For every “loss” dollar the State pays out 35 cents to the oil companies, a cash bonus for losing money elsewhere.
THEY WILL NOT PAY ONE DIME TO THE STATE OF ALASKA. THEY WILL COLLECT FROM THE STATE OF ALASKA HUNDREDS OF MILLIONS OF DOLLARS IN “REFUNDABLE CREDITS,” ALL FOR THE PRIVILEGE OF STEALING OUR OIL, AND AFTER THEY BANKRUPT THE STATE GOVERNMENT THEY INTEND TO CONTINUE COLLECTING FROM YOU.
Between 1982 and 1997 the net loss to “worldwide apportionment” was $4.6 billion, or $300 million a year. For 2012 and 2013 that loss is at least $676 million. Only in 2006 when the State made $44 million on this deal did the state profit from this arrangement. One year out of 40, basically. Despite this, key Department of Revenue personnel, even while acknowledging the state’s historical estimates show “separate accounting” would have brought in more, insist on the possibility that the State could make more money from this arrangement in the future.
That, of course, is naïve to the point of stupidity. These are people who have never been in the field doing the work of tax accounting, for with the combination of “refundable credits,” “worldwide apportionment,” the buying and selling of net operating losses, and other credits against tax, any tax accountant or lawyer worth his pedigree should put the oil companies in a position where they don’t have to pay any tax for the next 30 years under the provisions of the “Coghill Abomination.”
IN EFFECT, THE MORE THEY PRODUCE THE MORE IN CREDITS THEY GET TO STEAL FROM YOU. AND FOR ALL THOSE LOSSES IN OTHER PLACES THE STATE OF ALASKA PAYS OUT 35% CASH, OUR MONEY.
As State Representative Les Gara has noted in a recent article, at $12 million a year marijuana taxes will be greater than oil production taxes in three of the next four years. By the time you factor in the credits the oil companies are deep into the state vaults. “It is crucial that we all drop our ideological and party labels, and come together to fix a broken system of unaffordable oil company subsidies,” Gara said.
After $862 million in operating and capital budget cuts State Senator Anna MacKinnon, who has never met an oil company she did not love passionately, said she is still hearing from Alaskans who want more reductions. “I would say we’ll begin talking about revenues when the people of Alaska believe we have the right size of government.” Please fire this fool.
MacKinnon believes the oil companies have been taxed enough and should not be subjected to any modification in the tax regime despite the fact the oil companies wrote it for their benefit only. Also despite the fact that it is resulting in a net loss to both the State of Alaska and to its citizens. This nut job with her far right wing anti-tax agenda is more concerned with collecting taxes from you so that she can effect even more job cuts than she is with collecting taxes from the oil companies. YOU PAY, THEY GET RICH.
This is the intransigent position of the “Coghill Abomination.” The oil companies have paid enough, so now it is up to you; but you get to finance your state government only after you pay the oil companies all those tax credits for stealing all the oil. Every year.
At the beginning of 2014 the state’s general reserve accounts were in the vicinity of $16 billion, and have not been replenished by additional funds to any great degree. All of that money will be gone sometime between October 2017 and the first or second quarter of 2019. My original estimate was fourth quarter 2017, Ron Duncan’s September 2018, the Governor’s some time in 2019. At that juncture all that remains is the Permanent Fund and its earnings reserve account.
The Permanent Fund itself does not exist in the form of cash. It is invested in all kinds of stuff, only some of which is in any sense liquid. The earnings reserve account, from which is paid the Permanent Fund Dividend, is only partially in cash. In each case that value is a snapshot, an estimate of value at a moment in time; a value that will fluctuate. So whether it is actually worth that much or not remains an open question and concern.
If it is performing, this fund can expect to earn $1.5 to $3.5 billion a year, that’s it. It lost $9 billion of value in ten weeks back in 2008, an event that will recur at some point in time. That is intended to be the basis of state financing under the “Coghill Abomination,” “Oil Company” Walker’s plan, and Ron Duncan’s plan (GCI, Alaska’s Future) henceforth and forever.
In the meantime the oil companies will be standing in line with their credit chits, all derived from the toys they purchased with the Alaska oil they stole, waiting to drain the earnings reserve account and then the Permanent Fund itself, and that, folks, IS HOW THE “COGHILL ABOMINATION” IS DESIGNED TO PLAY OUT.
In Part 9, what to do, what to do.
Please forward to your friends with the awareness that this is a process and design well on its way toward its planned conclusion that may in fact be unstoppable.
David G Hanger
Received May 15, 2016
- Published May 17, 2016
Part 7: “OIL COMPANY” WALKER, “OIL CAN” ORTIZ, AND OIL COMPANY SOCIALISM By David G Hanger
Part 6: “OIL COMPANY” WALKER, “OIL CAN” ORTIZ, & OIL COMPANY SOCIALISM By David G. Hanger
Part 5: “OIL COMPANY” WALKER, “OIL CAN” ORTIZ, AND OIL COMPANY SOCIALISM By David G Hanger
Part 4: “OIL COMPANY” WALKER, “OIL CAN” ORTIZ, AND OIL COMPANY SOCIALISM By David G Hanger
Children of the Territory By David Otness
Part 3: “OIL COMPANY” WALKER, “OIL CAN” ORTIZ, AND OIL COMPANY SOCIALISM By David G Hanger
Part 2: “OIL COMPANY” WALKER, “OIL CAN” ORTIZ AND OIL COMPANY SOCIALISM By David G Hanger
PART 1: “OIL COMPANY” WALKER, “OIL CAN” ORTIZ, AND OIL COMPANY SOCIALISM By David G Hanger
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