Thursday, January 12, 2012

Time to move beyond talk as legislative session starts

By Lee Leschper
Alaska regional vice president for Morris Communications

We’re off to an interesting start on what could be an historic year.

Already this year Gov. Sean Parnell has gathered a room full of movers and shakers, with the CEOs of Alaska’s big three oil companies, to talk about the potential for a natural gas pipeline to produce liquefied natural gas for sale in the Far East.

It’s in keeping with his commitment to do what it takes to refill the trans-Alaska oil pipeline with 1 million barrels of oil a day. And the opening round in a legislative session that starts this week in Juneau with some big expectations and bigger challenges.

This is the leadership we need from the governor. Great things always start just such a vision. Connecting the dots, moving from vision to action, will be a larger undertaking.

The Jan. 6 Meet Alaska conference, the annual gathering of the Alaska Industry Support Alliance, got down to detail and to reinforce the need for a change in tax law to attain that goal.

Specifically, BP Exploration (Alaska) Inc.’s John Minge said that only a big change in Alaska oil tax policy will bring more oil company investments to the state. And that it will take a $150 billion investment from those players to generate those million barrels a day.

The state Department of Revenue’s Bruce Tangeman was equally emphatic, saying that only radical changes, not just a few tweaks on the oil tax’s reciprocity, will bring that investment to Alaska.

Is it the right time?

Clearly the vast majority of Alaskans, in and out of the oil business, want action.

Alaska’s Clear and Equitable Share, ACES, was passed in large part because the timing was right, because both voters and legislators agreed the state deserved a bigger share of oil profits.

They united behind then-new Gov. Sarah Palin to demand a bigger cut for the state. And in the final version of ACES, the Legislature demanded even more. The whole process happened in weeks, really just days, so it’s reasonable to expect it was a bold but imperfect draft. It was also based on a lot of projections.

It made great sense in 2006. Does it still?

Aggressive taxation may have made sense when there were fewer alternatives to Alaska oil. That is no longer the case. Now it is time to review five years of history under ACES, with real data, and work to improve the plan.

There seems almost universal agreement it’s got to address reciprocity and reward both exploration and production, with rewards for both the state and the oil companies. It’s got to be a win-win for the industry, Alaskans and Alaska businesses.

It can’t abandon the expectation that Alaskans get a fair return.

The next generation of Alaska oil tax codes has to continue to protect the 90 percent of Alaska’s operating revenue that oil generates.

We also have to understand that the more radical the proposed changes, the less chance we can expect agreement in the Legislature.

It’s not said often enough that ACES hasn’t been all bad for the state. During these last few brutal economic years, when most of other states are sinking deeper into bankruptcy, Alaska has added billions to our reserve.

BP’s Minge pointed out last week that the oil industry makes billion-dollar decisions based on expectations 50 years into the future. We need to have that same 50-year vision for the state.

Is it realistic that any new oil program works whether oil is selling at $80 or $180 a barrel, and whether gas is $2 or $10, whether the customer is China or the Lower 48?

Time will tell.

The perception is that Legislature does most of its work in a flurry at the end of the 90-day session. Let’s not waste those 90 days this year. Lawmakers have heard for months – since well before the 2011 session – that ACES needed changing, that the big producers won’t invest the big money to find and produce new oil in the current tax environment.

Alaskans share an expectation — that their elected officials will do their jobs, will work together and compromise to make real and positive legislation to benefit all Alaskans as well as to the businesses that provide us the economic benefits we have come to rely on.

That meaningful work must begin from Day 1 of the session.

Lee Leschper is Alaska regional vice president for Morris Communications publications including the Alaska Journal of Commerce. Email him at lee.leschper@morris.com.

Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/AJOC-January-15-2012/EDITORIAL-Time-to-move-beyond-talk-as-legislative-session-starts/#ixzz1jHLinhFX