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Monday, April 18, 2011

Oil Tax Winners & Losers

Anchorage Daily News

In any language, oil tax haste a bad idea
COMPASS: Other points of view


(04/16/11 19:01:50)
Scott Hawkins' compass piece attacking the Senate ("Senate stands idle as pipeline dries up," April 14) for resisting lobbyists pushing for oil tax breaks is a classic piece of rhetoric and should be studied in all classrooms for its flaws.
First, Hawkins commits the fallacy of "argumentis ad populum" by treating us to a dog-and-pony parade of all tax-break supporters.
Next comes a false premise, which also poisons the well: "ACES is not working" is the premise. It is a "policy disaster" and is based on "punitive tax hikes."
Then Hawkins commits the error of "cum hoc ergo propter hoc" or confusing a correlation with a causation -- specifically, that a drop in production on the North Slope is tied to ACES. It isn't. The governor's own charts show a long decline since the 1980s.
Then he "appeals to authority" -- quoting Reagan speechwriter Peggy Noonan of all people -- and sauces his rhetorical salad throughout with ridicule: the Senate is "out of touch," "obtuse," "sits on its hands."
He ends with arguments of emotive persuasion, fear: "oil pipeline close to shutting down."
Of particular note is his angry rejection of "study." He is angry that the Senate wants to study the issue. This seems odd coming from an economist, which he once was, but I guess it is understandable coming from a businessman beholden to the industry, which he now is.
The "studies" that Hawkins contemptuously rejects are precisely what is required by the fiduciary trust embedded in the oath of office that the senators took, to uphold our state constitution (e.g., Title VIII) and to look out for our collective interests, not just those of Mr. Hawkins.
There were so many red flags on the field of play during this debate over oil tax cuts that for the Senate to do anything less than deliberate would be an abrogation of their responsibility; Sen. Gary Stevens and his colleagues deserve applause rather than ridicule.
One red flag in particular has not been talked about much but deserves to be mentioned. The governor hired a consultant to review the House version of the tax break in February. The consultant is Richard Ruggiero with Gaffney, Cline & Associates of Houston, Texas. Here is a summary of what he told the House Resources Committee:
The companies may or may not invest the proceeds of their tax cuts in Alaska. There are no guarantees. Mr. Ruggiero wisely took no position on HB 110. Instead he presented a range of possibilities based on his reading of the bill. If Sean Parnell's gamble pays off and the oil companies vigorously reinvest in Alaska's fields, the state could realize $210 billion over the life of the fields; if, however, they reinvested those tax-break dollars elsewhere, the state would lose $20 billion over the next 15-20 years. In so many words, Mr. Ruggiero was telling us that HB 110 (and its companion Senate bill) is a crapshoot.
Since then, a new analysis reveals a somewhat more pessimistic view of the crapshoot. Mr. Ruggiero gets wiser by the day.
On April 13, Sen. Bill Wielechowski (D-Anchorage) produced a preliminary cost-benefit analysis of the effects Conoco Phillips' proposed $5 billion investment if HB 110 were implemented.
As Sen. Wielechowski put it: "Essentially ... Alaskans are being asked to give up $13.5 billion ... in exchange for about $3.2 billion in new state revenues (from new oil production). I don't know many CEOs who would be OK with a deal like that."
Now back to Mr. Hawkins and his echo chamber of real and alleged supporters. They all would be more intellectually honest to say that they need the state and future Alaskans to lose so they can win. That way, when they all leave us to follow Big Oil out of Alaska to work in some other center of global investments funded partly by our dollars, we won't take it personally.

Elstun Lauesen is a lifelong Alaskan, financial development consultant and former socioeconomic officer with the state Pipeline Coordinator's Office.

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