Choosing status quo won't fill up the pipeline

Anchorage Daily News - August 28, 2010

With an economic monster scuttling around in the state's fiscal attic, it is nothing short of astounding that so many Alaskans -- at least those who bothered to vote in last week's Republican primary -- seem satisfied to embrace the status quo in the state's top office.

Mind you, it was an odd, unfocused, angry election, even bitter at times -- a hard row to hoe just to get more of the same when what we desperately need is change.

Some 43,754 Alaskans, by early counts, voted for Gov. Sean Parnell, a guy who supports Alaska's Clear and Equitable Share oil tax, a punitive, overly progressive tax foisted on the oil industry in 2007 by his miffed, half-term predecessor, the lovely Sarah P. The levy unfairly siphons off at least $1 billion more than it should from the oil companies each year and makes Alaska as attractive to them as a pig wearing lip gloss.

The tax -- key to Alaska's immediate fiscal future -- must be fixed or repealed. Period. A gas line -- if built -- will not save Alaska. This state needs oil. The tax that now makes it harder to get that oil will be a key issue in the upcoming gubernatorial election pitting Parnell against Democrat Ethan Berkowitz, who has his own notion about oil taxes and dealing with the industry -- and it's not ACES.

The levy is just another way to say, "Here comes a personal income tax," but there are those -- Parnell among them -- who say ACES is going gangbusters; that employment is up on the North Slope; that expenditures and exploration are up; that everything is fine and those opposed to the tax are only trying to dodge paying their fair share. Tax supporters will tell you the global economy, declining oil prices a few years ago and federal offshore drilling bans caused the industry's North Slope woes -- not ACES. The industry, they warn, is lying. For myopia, try this, from Rep. Les Gara. He's quoted in the Alaska Industry Support Alliance's third-quarter "Link" publication saying:

"When jobs are up, it's not OK to lie to Alaskans in seeking a tax break. When investment is up, it's not OK to lie to Alaskans to get a tax break. When profits are up, it's not OK to lie to Alaskans to get a tax break."

It turns out, jobs are not up, if the Alaska Department of Labor can be believed. Oil and gas job numbers are down, reaching their lowest level in 30 months. Investment -- the kind that produces oil -- is not up, either. As for a profit, the companies -- certainly not the state -- are supposed to make a profit. It pays for jobs, exploration, investment, production.

What Gara and the rest will not tell you is that ACES has not added a single drop of oil -- not one -- to the pipeline, already running two-thirds empty. The oil in that line pays for 90 percent of the state government. So far, our economy has been saved by healthy oil prices, but that's always a crapshoot. We need new oil. We need the 5 billion barrels pooled beneath the North Slope to start sloshing down the trans-Alaska oil pipeline.

So far, state government has acted as if diminished throughput in the pipeline -- at a rate of 6 percent a year -- is no big deal. It's huge. In ACES' first two years, throughput dipped to 754,133 barrels from 802,415; today, it is about 660,000. When the flow is reduced to 500,000 barrels daily, or less, the aging 800-mile line from the North Slope to Valdez may develop serious problems. That's in five or 10 years. What then?

There's more. The "Link" reports "while the active drilling rig count in the Lower 48 more than doubled in the last half of 2009, Alaska's declined." The Alaska Oil and Gas Conservation Commission says exploratory and development drilling hit a 10-year low last year -- with only one exploratory well drilled on the North Slope.

The reason for all of that is the industry can make more profit elsewhere. What is the state doing to increase throughput or boost North Slope exploration and investment? Not enough. An incentive here; a nudge there.

Berkowitz and Parnell will clash on oil taxes. When they do, they will be talking about Alaska's future. Hopefully, at least one will understand we need oil, not just more of the same.

Read more: http://www.adn.com/2010/08/28/1429387/choosing-status-quo-wont-fill.html#ixzz0y6cpHgz1