Wed, 06/17/2020 – 9:01am
This week we publish an “explainer” from Robin Brena of the “Fair Share Act” campaign for no other reason than to illustrate the depths he and his cohort are going to deceive Alaskans into raising oil taxes.
The only thing the campaign is being honest about is the fact they want to dramatically jack up taxes by at least $1 billion per year according to their own estimate.
How they are trying to convince Alaskans to do so is a litany of outright lies or misleading claims being made by people who are still fighting the outcome of the 2014 referendum they lost over the current oil tax structure.
The first falsehood they are basing their campaign around is that the tax increase will only be charged against the three large “legacy” fields and “As a result, it will not impact the development of new fields in Alaska.”
This is pure garbage.
Because ConocoPhillips is required by the Securities and Exchange Commission to break out its Alaska operations in its quarterly and annual tax filings, we know that in 2019 the company made profits of $1.5 billion in Alaska while spending $1.5 billion on capital investments on the North Slope.
Every nickel of the company’s income last year was matched on building projects such as Greater Mooses Tooth-2 and exploration development at its massive prospect dubbed Willow.
ConocoPhillips executives have stated that while its board sets a global capital budget, its Alaska operations are essentially self-contained in that profits in Alaska are reinvested in Alaska.
Even when the company was losing $4.4 billion in 2015, its capital budget in Alaska remained essentially unchanged at about $1 billion and went from 5 percent of its global total to about 20 percent.
To argue that raising taxes on legacy fields will not impact the development of new fields is a naked attempt to fool voters.
Brena also attempts to mislead Alaskans by describing a “pre-tax profit” on a barrel of oil from Prudhoe Bay he calculates at $40.61 in 2018.
Investopedia defines “profit” as “the financial benefit realized when revenue generated from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity in question.” (emphasis added)
A gross, “pre-tax” profit may be useful to a business owner, but only insofar as it helps them determine what their tax liability will be.
A picture of profits without accounting for taxes is less informative than trying to interpret a three-year-old’s finger paintings.
Brena then combines a lie with another incomplete claim when he writes that Alaska “paid the producers more in cashable credits than we have received in production revenues” since Senate Bill 21 took effect for a full year in 2015.
Brena well knows that the major, “legacy” producers have never, ever received “cashable” credits that were only delivered to small companies with either no production or daily output of less than 50,000 barrels per day.
A favorite omission by the tax raisers when they talk about only production tax revenue is to never mention the record low oil prices that hammered companies — and the state’s budget — from 2015 to 2017.
By conflating the cash credits that predated SB 21 with production tax revenue, Brena et al claim that Alaska’s “share of production revenues after credits collapsed from $19 billion (2009-2013) before SB21 to less than $0 (2015-2019) after SB21.”
They don’t tell you what is in the most recent state revenue forecast, which also summarizes historic petroleum revenue from all sources.
According to the 2020 figures, from 2015 to 2019 the state collected $10.75 billion in unrestricted and restricted petroleum revenue.
At the same time, ConocoPhillips lost billions for three years from 2015 to 2017.
During 2016, BP reported that it lost about $1 million per day from its North Slope operations.
Nevertheless, they still owed production tax thanks to the gross minimum in SB 21 (that would have collected zero under the previous ACES), they owed property tax and they owed royalty payments.
Corporate taxes, which are calculated on net income versus gross (production tax and royalty), were negative but have rebounded to positive territory since 2018 as prices recovered.
Here we are again with another price collapse that has crushed revenue, production and jobs, yet the Fair Sharers blithely march along trying to appeal to Alaskans’ rightful concern over the budget and smaller dividends with a self-destructive solution that would drive a stake through the state’s economic engine.
We didn’t fall for it in 2014, and it is even more vital to see through another dishonest campaign in 2020.
Andrew Jensen can be reached at email@example.com.
06/17/2020 – 9:10am