JUNEAU, Alaska — On Wednesday morning, the State Senate will listen to testimony from the big 3 oil producers on Alaska's North Slope.
The three are in favor of a big oil tax reduction bill proposed by Governor Sean Parnell (R) Alaska.
Known as House Bill 110, the measure provides $1.8 billion in tax cuts for the next 10 years. Parnell believes the 18 billion dollar measure will provide at least $14 billion dollars of investments in return. He believes the rest of the difference will be made-up when the measure teases higher production out of the North Slope -- and boosts the flow in the Alaska Pipeline.
Indeed, John Minge -- President of BP Alaska -- says that without such tax reform, the North Slope is in big trouble. "we're guaranteed a 6 to 8 percent decline a year. You can pretty much predict the future of Alaska in that scenario," he says. Minge calls ACES -- the current oil tax bill -- "the state-is-going-out-of-business policy."
BP and ConocoPhillips have promised $5 billion dollars in North Slope investments -- over the next ten years -- in return for the $18 billion tax break offered by HB 110. But Exxon -- the third partner in the North Slope trilogy -- has made no such promise. And some lawmakers are worried that Exxon has a make-or-break veto on the $5 billion investment plan.
Then, just last week, Armstrong Oil and Gas -- which specializes in exploration -- wrote a letter to lawmakers in which it said that HB 110 "could" spur $9 billion additional investment dollars from companies interested in finding "new" oil at the slope.
But some lawmakers find it hard to take the investment promises seriously. Alaska State Representative Les Gara (D) Anchorage says, "They're selling us a dead horse." Gara feels that the oil companies are going to make the investments regardless of whether they get the huge tax break. "they're telling us that they're gonna do work that they're going to do anyway. But now they want $18 billion in tax credits," Gara says.
Governor Sean Parnell disagrees. Like BP's John Minge, he foresees further drops in North Slope production without his tax bill.
The Senate Resources Committee is proposing a far less generous tax plan than Parnell is offering. They want to limit tax breaks to $2.5 billion over the next 10 years -- as opposed to the governor's $18 billion. They say their bill is 7 times less generous than the governor, and provides incentives for increased production by the way it is structured.
Parnell argues that his bill isn't as expensive as it sounds, because -- he says -- it's the only measure that gets promises for investments in return for the tax breaks.
On March 12th, Armstrong Oil -- a fourth producer -- chimed in in support of the Governor's plan. It sent a letter to Alaska lawmakers. The letter seemed to promise "nine billion" in new investments at the North Slope in return for the governor's tax break. But in parentheses the letter said "$9,000,000.00. That's a 9 followed by only six zeros -- nine million instead of 9 billion.