For Immediate Release: October 28th, 2013
Parnell Administration Misled Alaskans In Effort to Sell Controversial Oil Tax Cuts
ANCHORAGE – Recent news reports about declining drilling in the British North Sea underscore the extent to which the Parnell Administration misled legislators and the public in an effort to win support for its controversial oil tax cuts.
The Administration claimed production in British waters had turned around as a result of tax cuts similar to the ones it was proposing. In presentations to legislators and others, it maintained “Other Basins Have Turned Production Around” (see Administration slide) and highlighted the United Kingdom as its key example.
“The Administration’s claims could not have been further from the truth,” said Senator Bill Wielechowski (D-Anchorage). “Production in the British North Sea could plunge by 22 percent this year, which would be the biggest drop-off on record.”
A variety of British news organizations have warned of the record slump, including the Financial Times and Telegraph. (http://tinyurl.com/kgnfz9v).
In addition, this week Reuters (http://tinyurl.com/os4kstv) reported that drilling in Britain’s North Sea is down dramatically, despite the tax breaks enacted by the British government and touted as a model for Alaska by Parnell.
LONDON, Oct 22 (Reuters) – “The number of wells drilled in the British North Sea fell by more than a third in the third quarter, potentially raising further concerns about the region’s outlook after a downgrade to production forecasts earlier this year.
During the three months to Sept. 31, the summer period which is traditionally Britain’s busiest for drilling, 11 exploration and appraisal wells were started, 35 percent lower than the same period last year, a survey by Deloitte Petroleum services said on Tuesday.
The number of wells drilled in the third quarter was also 31 percent lower than in the second quarter of 2013. Britain’s oil and gas production from the North Sea has fallen by about two thirds since 2000 and posted particularly steep falls of 14.5 percent last year and 18 percent in 2011.” (Emphasis added.)
Wielechowski said Alaskans were repeatedly misled by the Governor, former Commissioner Dan Sullivan, and others in the Administration about the success of tax breaks in Britain and elsewhere.
For example, on February 28, 2013, then-Commissioner Sullivan told the Senate Finance Committee:
“One of the questions as we were preparing this tax bill over the past several months with the Department of Revenue is, we asked the question, ‘Hey, can we turn this around? Have other basins, either in North America or throughout the world turned around throughput declines?’
And, Mr. Chairman, as these next few slides will indicate, the answer in some ways was kind of surprising. It wasn’t that we were searching for who has been able to do this, we realized that almost every major basin is doing this, is turning around their production declines with one very significant exception – the State of Alaska.
So, for example, this is an example that has gotten a lot of news in the last three or four weeks: the North Sea, another huge mature oil basin within the U.K. went through a similar situation with us. A big basin. Declining production.
Three or four years ago, they cranked up oil taxes on the companies, predictably a lot of the companies left, production declined even more and in the last year or year and a half, the U.K. has undertaken significant tax reform, but already it’s leading to very, very vast increases in investment and production, anticipated production, anticipated state revenues for the U.K.
Just about three days ago, the Wall Street Journal did a big, big article on this tax reform, increase in production, and I think it’s very analogous in many ways for what we’re trying to do here in the State of Alaska. So, that’s a good example. (Emphasis added.)
Wielechowski noted that investment in the British North Sea increased in 2012 before the tax cuts were even instituted and continued in 2013. But this increase is expected to lower next year, according to Oil and Gas UK, an industry lobbying group. It is expected to drop from 13.5 billion pounds this year to 8-10 billion pounds in 2015 and thereafter. Most of this spending is on aging infrastructure and decommissioning of offshore oil rigs that are no longer productive.
“Alaskans were asked to give up billions in exchange for the promise of production increases,” Wielechowski said. “We were told it had worked in Britain, which is, plain and simple, not true. The Governor and Commissioner Sullivan peddled bad information to generate support for a flawed piece of legislation. This is a disturbing betrayal of the public trust.”
This is the 9th of Senator Wielechowski’s reasons to repeal the Oil Wealth Giveaway. To view the previous 8, go to http://www.itsouroil.blogspot.com/. For more information, call 242-1558.