SitNews - Stories in the News - Ketchikan, Alaska


Oil tax debate fault lines wide
By Sen. Kim Elton


October 28, 2007
Sunday PM

I've yet to see a multi-national oil and gas company operating in Alaska more interested in our bottom line than their bottom line. That's why I'm a bit of a skeptic when I hear them urge us: 1) to cut or freeze oil taxes right now; so 2) they'll invest more; with 3) the ephemeral promise state revenues bump up later.

I'm skeptical of their cajolery for two reasons. First, every independent consultant testifying before the legislature says there is room for an increase in state oil taxes without threatening future investments by the industry. Second, past multi-national behavior does predict future behavior, and their corporate past behavior is not trust inducing.

I offer as forensic evidence in support of my past behavior point: the decade plus court battle over royalty oil payments; separate accounting tax battles; Pt. Thompson lease disputes; Exxon stiffing Alaskans on the Exxon Valdez court-ordered awards; and out-of-whack oil pipeline tariffs.

Considering just this discreet list, it doesn't take an FBI profiler to outline a pattern of behavior that can point a finger at suspects.

The royalty/tax/lease/spill awards/tariff issues enumerated above diverted billions and billions of dollars from Alaska and Alaskans to the multi-nationals' bottom lines. After years and years of court battles, we did recover some royalty losses; the U.S. Supreme Court, after years and years of litigation, sided with us on separate accounting (though we never did revert to that higher revenue tax recipe); after years and years of waiting, we're seeking to take back the Pt. Thompson lease for not fulfilling lease terms, after years and years of waiting Exxon is appealing court awards to the U.S. Supreme Court, and after years and years of what now appears to be usurious TAPS tariffs we're pursuing adjustments and a potential recovery of losses.

But recovering ill-gotten gains from the multi-nationals doesn't mitigate the original behavior. In fact, it establishes a pattern--they will do whatever they think they can get away with for as long as they can get away with it. After all, when billions of dollars are at stake, why not? The only downside for them is they may have to pay us back if we persevere through years of litigation. Even if we do persevere, they may only have to pay back dimes on the dollar.

I'm not calling this past behavior on the part of major oil companies criminal. I don't believe it was right, but it probably wasn't criminal. But the multi-nationals' not right behavior ought not be forgotten as we try during this special session to fulfill our constitutional mandate to manage our commonly owned natural resources for the maximum benefit of Alaskans.

As we struggle this special session with oil tax changes that can turn us toward a raw deal or toward a fair deal, the philosophical fault lines are becoming clear. All the independent consultants suggest we can raise taxes without jeopardizing investments that keep Alaska's existing and yet-to-be-found fields pumping far into the future. On the other side of that fault line, all the oil companies testify we should cut the taxes they pay or, failing that, we should freeze the existing taxes to better ensure their continued participation in our future.

I hope we listen to the independent consultants. They have no financial stake in this special session's outcome. If we listen and accept the premise there is room to raise taxes to maximize benefits to Alaskans and follow the constitutional mandate, the challenge quickly comes down to when does a fair deal for us become a raw deal for the oil companies?

I think the independent consultants, who have experience in oil regimes around the world working either with the industry or governments, can give us a good feel of what's fair--what's rational.

I don't think, given the royalty/tax/lease/spill award/tariff experience over the last few decades, we should let the oil companies deliver a tax plan for the state. That's akin to asking a wolf to deliver us a rabbit.

About: Sen. Kim Elton (D) is a member of the Alaska Legislature representing Juneau.

Received October 26, 2007 - Published October 28, 2007


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Ketchikan, Alaska