Dear Neighbors

Let me say this for the record. The Legislative session should have ended yesterday. I was willing to get all my work done, but in politics at the end of session the negotiations get taken over by a few of the highest ranking leaders – and roughly 50 of the 60 of us have no say other than the moral prodding we can offer those negotiators. That’s not to say who among the negotiators was at fault. But here’s what I do know, and what most of the media didn’t report.

Remember that oil tax debate? The one where the Governor wanted to give away $8 billion in ill-conceived tax reductions over the next five years to companies without insuring any extra production or hiring beyond what they were going to do anyway? Followed by glitzy, misleading promises by British Petroleum and ConocoPhillips that they would do “in-field drilling” – drilling they’d do anyway in already-developed fields that Conoco has admitted to shareholders earn them very high profit margins under current tax law? Wow – they promised if we rolled back the state’s share of oil revenue by $8 billion, they’d do the same development logic says they were going to do without any tax breaks. What a deal. Only in today’s Alaska.

If you listened closely to those PR speeches, you’d note they carefully avoided promising what the Governor said his oil tax bill was all about – adding exploration in new areas. British Petroleum and Exxon in fact said the Governor’s bill was unlikely to lead them to do any new exploration wells. Conoco said they wouldn’t commit to any either, though they might conceivably drill in “satellite” fields, which are fields connected to ones they’ve already developed. That is, the Governor’s bill gave away $8 billion over the next five years for promises of……nothing. And it was written in a way that let the major companies take all of the $8 billion in giveaways out of state, rather that requiring any local investment.

Well, then the Senate did the right thing. The Senate said that bill was flawed, and that it gave away the state’s carefully earned savings without any promises of new development that would earn us back what the generous tax giveaways, well, gave away. Then, the Governor issued a threat. That threat is a big part of why the special session started this morning.

The Governor’s Threat

The Bi-Partisan Senate said the oil tax facts the Governor presented were flawed. In fact they were very skewed. The Governor claimed jobs were vastly down when his Commissioner of Labor conceded they are at an all time high. The major producers declined to commit to any new exploration in new fields. His office spun evidence that actually said the vast majority of companies found Alaska’s current tax system to be competitive. He failed to account for the state’s current generous tax breaks, or his own advertisements saying the current law was attracting new exploration. His representatives and oil industry members threatened that the pipeline was on the verge of shutting down – by relying on a statement from someone employed by Conoco, Exxon and BP – when BP’s own internal documents tell shareholders the pipeline is likely to run until 2060. Hmmm. The House, it appears, was fibbed to by industry in order to create a sense of emergency to pass the Governor’s flawed oil tax giveaway.

So what did the Governor do when the Senate said they’d like more, true and objective information to craft a better bill? He said he’d veto the Senate’s needed energy projects – energy projects in a resource rich but energy poor state. He said that back in March. That’s what set off the debate that has left us past the end of the regular session.

The Governor’s threat led the Senate to add a provision trying to protect small communities against the threatened energy project vetoes. That provision – which said if the Governor vetoes small community projects, then the ones the Governor wanted would be vetoed automatically – was weird, controversial, but a direct response by the Senate to protect small communities against the Governor’s veto threat. That threat came in retaliation for the Senate’s correct decision to fairly evaluate the oil tax issue, and look for a better solution that would actually bring jobs to Alaska. Here’s a link to our proposal for a better oil tax measure that would lead to more jobs and more exploration.

One final thought on the absurdity of the Governor’s veto threat. If his oil tax rollback passed, the state would be in a world of hurt. He got it backwards. Passage of his bill would have justified veto threats because the state would have no money. But his threat to veto projects because the Senate did the smart thing, and kept the state’s fiscal house in order and safe, made little sense. You veto when you have less money, not when you have $8 billion more.

So – here we are. I’ll work to get everything finished as soon as possible. But I also wanted to share with you the untold story explaining one of the reasons we’re still stuck here.

As always, call if you have any questions.

Best Regards,