NEWS: Giveaway changes: More Money, More Power to Oil Companies

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April 4, 2013

Committee Gives Away More Money, More Power to Oil Companies

Late Night meeting increased size of giveaway, repeats past mistakes


JUNEAU – Just after 2:00 a.m. this morning, the House Resources Committee voted to give away more of Alaska’s oil wealth with no guarantee of new production and to make the state rely on oil company statements instead of actual receipts when auditing deductions for tax breaks. The committee also tried to undo hard-won provisions that allow the oil companies that own the Trans Alaska Pipeline (TAPS) to charge the state and other companies for all of their expenses, not just the “reasonable” expenses allowed under current law.


“While most of Alaska was asleep, this committee voted to give away billions more of Alaska’s oil wealth and to lock our own auditors out of the information they need to make sure the companies are paying what they owe Alaska. This adds insult to injury, and means the giveaway will be much bigger than anyone expects, just as it was in 2007,” said House Democratic Leader Beth Kerttula (D-Juneau) who watched the hearing until the end. “This puts Alaska back into the situation we had under Governor Murkowski’s plan where we lost $800 million dollars more than we expected because we had to rely on company paperwork instead of actual receipts.”


Just after 2:00 a.m., the committee took up amendment number 34, which reduced the maximum tax rate for all oil under the new plan from 35 percent to 33 percent, giving away an additional $300-400 million dollars a year. This rate applies to all oil, whether it is already in production or not.


“There is no need to sell Alaska’s oil for less money than it’s worth,” said House Democratic Whip Chris Tuck (D-Anchorage), who sits on the resources committee. “This is just a bigger across-the-board giveaway for nothing in return. This is negotiating against ourselves when as an owner state we should be negotiating from a position of strength.”


Amendment number 32, the “trust us” amendment, reinstated the policy that allowed the companies to pay $800 million less than the state expected under Governor Murkowski’s Petroleum Profits Tax (PPT) in 2007. By not requiring actual receipts, the change makes the state’s auditors rely on a company’s own internal summaries of its expenses instead of actual receipts when determining whether expenses qualify for deductions from the profits-based production tax. Department of Revenue auditors testified to the committee that this change will be problematic.


“The state has already had to absorb hundreds of millions of dollars in surprise losses when we let this happen before, and even now we’re being asked to make these multi-billion dollar decisions without adequate information,” said Representative Geran Tarr (D-Anchorage) who serves on the Resources Committee. “We were asked to vote without any information from the Department of Revenue. I strongly disagree with this.”


In the aftermath of the Exxon Valdez oil spill in 1989, it became known that ExxonMobil was charging the State of Alaska and other oil companies who ship oil through TAPS for their public relations expenses spent. Those expenses and other excessive expenses inflated the amount the TAPS owners charged the State of Alaska and other companies which ship oil through the pipeline, lowering their past tax liability and stifling competition. The State won litigation disputing the tariff in 2008, earning $600 million for just two years of lost taxes and royalties based on the overcharges. While that litigation was still pending, the Legislature passed a provision to require any expenses added to the tariff be “reasonable.”


“Alaskans should be appalled that anyone would even think this is a wise idea,” said Rep. Kerttula. “Have we not learned these lessons the hard way already? They’re already allowed ‘reasonable’ expenses, they should never be allowed charge us for anything more than what is ‘reasonable.’”


The committee voted not to make the changes to what the TAPS owners can charge in the tariff.


The House Resources Committee moved the bill to its next committee around 2:10 a.m. this morning.


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