A Note From Rep. Les Gara

I know it’s shocking. But believe it or not, some people who get paid to help their corporate clients make money, sometimes are not fully truthful.

There’s a misleading ad campaign out there, being paid for by a group allied with Exxon, British Petroleum and Conoco. Those companies want you to get less revenue for the Alaska oil we all own in common. The oil that funds our savings accounts, and keeps Alaska from a crippling deficit. The oil that funds our schools, our Troopers, and that has prevented Alaska from joining the worst of the recession being suffered across the country.

Yesterday I and many of my colleagues called on those behind the “Faces of ACES” ad campaign to roll back oil taxes to tell the truth. I know those who write political ads for corporations don’t think that’s legal. But it is. Even when you launch an ad campaign to make you billions, on the backs of our children and seniors, you are, in fact, allowed to tell the truth.

Such as the truth that, contrary to the current ad campaign, oil and gas jobs in Alaska are up, not down. Like the truth that, contrary to the ads, oil and gas investment is up, not down, since oil tax reform was passed in 2007. Like the truth that the profits of the oil companies calling for tax breaks are fat, not skinny ($6 billion in Alaska for Conoco alone since the law they wanted changed was passed).

Let me be “fair and balanced.” While I’m skeptical of company claims that they’d increase investment if we gave them tax breaks, that’s not the point here. The point is that the ads are misleading. We can have the oil tax debate. But some truth from those lobbying the Legislature for us to lower the state’s oil revenue share would help.

Yesterday morning I worked with my colleagues to write the following letter to call on the “Alliance” (which has executive members who work for all the major oil companies and has historically done the oil companies’ lobbying) to tell the truth in the ads they are publishing across the state. Here it is.

Alaska State Legislature

State Capitol
Juneau, Alaska
99801-1182

(907) 465-4766 phone
(907) 465-4748 fax

House Democratic Caucus

February 2, 2010

Re: Alaskans Deserve Truth About Increase In Oil Jobs: Alliance Ads Misleading

Dear Mr. Hegna:

Jobs and investment, and a fair share for our oil, are important to Alaskans. Under ACES both jobs and investment in Alaska have increased. Your current ad campaign misleads Alaskans, and we ask that you correct them by providing Alaskans with accurate information. Alaskans deserve a fair discussion of our oil and gas policy.

We are writing to ask that you make the following four corrections to your ads, so Alaskans will be offered fair discussion rather than misleading information.

Correction 1: Jobs Are Up Under ACES.

Today, under ACES, oil and gas employment has increased in Alaska by roughly 50% since 2005, when taxes were low. Prior to ACES, in 2005, oil and gas employment was at roughly 9,000 people. Since ACES, it has increased to roughly 13,000 people. Employment has increased by 2,000 just since the 2007 passage of ACES. These numbers are confirmed in the attached Alaska Department of Revenue ACES Status Report (pp. 8-9).

Correction 2: Investment Is Up Under ACES.

Capital investment in oil and gas exploration and development has increased under ACES. It has more than doubled from roughly $1 billion in 2004 to over $2 billion this past year, and has also increased since the passage of ACES in 2007, and even after oil prices fell after 2008. Status Report pp. 7-8.

Correction 3: With Lower Taxes, Oil Companies Provided Fewer Jobs and Less Alaska Investment:

Your ads are deceptive in suggesting that companies would invest more if Alaskans received a smaller share for our oil. That disregards the history of Alaska oil policy.

Prior to reform, in 2006, Alaska enforced a minimal Production Tax. It was less than 1% on 16 of their 19 North Slope fields. See attached Jan 27, 2010, Legislative Research Report, p.2. On 14 of those fields the Production Tax rate was 0%.

With nearly a 0% Production Tax on North Slope fields, between 2000 and 2006 oil and gas jobs varied between 8,000 and 10,000. Starting with the passage of ACES in 2007, employment has increased to roughly 13,000 workers. Status Report, pp. 8-9.

Correction 4: Companies Are Making Billions In Alaska Profits

Oil company profits are high in Alaska.

In 2009 Conoco reported a loss on its Lower 48 oil and gas exploration and production. Its Alaska profits in 2009 were roughly $1.5 billion. Since the passage of ACES in 2007, Conoco has reported $6 billion in Alaska Profits, during a period that riskier investments have resulted in losses in many places Conoco invests, including in Venezuela, where its property was nationalized.

Finally – Conoco’s profit margins in Alaska are higher than its Lower 48 and worldwide margins. In 2009, only 14% of its exploration and production costs were in Alaska, but 43% of its worldwide profits came from Alaska. Attached, 2009 Conoco Phillips E&P Net Income and Production Chart.

Exxon doesn’t report its Alaska profits publicly. But in both 2007 and 2008, with ACES in place, it had its two best profit years ever. In each year it earned more profit than any company in the history of the world, $40 billion in 2007, and $45 billion in 2008. At repeated hearings Exxon has always refused to comment on its high Alaska profits.

With Best Regards,

Representative Beth Kerttula Representative Les Gara

Representative Harry Crawford

I hope all is well. And, as always, call if you have any questions, thoughts or concerns.