Alaska vs Big Oil: the soon to be downfall of our governor

[Bad_Daddy 2,209]

http://www.adn.com/2012/03/21/2384293/oil-producers-cuts-must-be-meaningful.html

Oil producers: Tax cut must be 'meaningful'

LEGISLATURE: Senate bill won't spur development, executives say.

JUNEAU -- The Senate's oil-tax reform bill slogged through another day of hearings Wednesday, this time with testimony from representatives of the three big Alaska producers who all said the tax cuts in the measure were too miserly to spur additional development.

The Senate bill's "minimal decrease" from the current tax program on oil and gas, known as ACES, "has an immaterial impact" for industry, said Bob Heinrich, vice president of finance for Conoco Phillips Alaska.

"That's not to say that the numbers don't seem big on a dollar basis -- our industry works in big numbers," he added. If oil were selling at $130 a barrel, about $25 more than now, "the reduction is almost $300 million to producers, but in the context of the total taxes paid at that price point of nearly $15 billion, it's immaterial," Heinrich said.

Gov. Sean Parnell and the Republican-led majority in the House say that ACES -- Alaska's Clear and Equitable Share, a cornerstone of Sarah Palin's administration -- is encouraging the oil industry to look elsewhere to invest its money. The progressive tax structure of ACES accelerates the state's take as prices rise, leading industry to complain that its investments here are not yielding the same profits at current high prices as they would in another region of the country or world. From their perspective, it would even be worse if prices continue to rise.

The House gave industry much of what it wanted when it passed House Bill 110 last year. The word "meaningful" has come to be used by Parnell, industry and its supporters to describe those cuts.

The bipartisan coalition controlling the Senate is much more skeptical. Its own measure, Senate Bill 192, would tax less at high prices than ACES but not make deep cuts of the House measure. It also provides some tax incentives for oil from new fields and imposes new reporting requirements to hold the industry more accountable.

The Senate has been studying the issue with testimony from hired experts, state officials, industry representatives and residents. Sen. Bert Stedman, a financial services professional and Republican from Sitka who co-chairs the Senate Finance Committee, said Wednesday the studying will continue at least into next week.

BP and Conoco Phillips had weighed in on Senate Bill 192 before, coming to Juneau last month to testify before the Senate Resources Committee, the bill's first stopping place.

Exxon Mobil didn't appear before the Resources committee, sending instead a letter. That led to an increasing chorus of questions: Would the company, a partner in Prudhoe, support or veto the pledges of the other companies to invest at least $5 billion if the "meaningful" tax cuts of the competing House bill were passed by the Senate?

On Wednesday, the bill's venue was the Senate Finance Committee, and this time, Exxon Mobil sent its top Alaska official, production manager Dale Pittman.

"For the record, Exxon Mobil fully supports both of our operators, Conoco Phillips at Kuparuk and BP at Prudhoe Bay, in their continued commitment to invest in Alaska and to pursue all additional opportunities and investments that become viable with meaningful tax reform, because we do think that's important, and we are here for the long term," Pittman said at the opening of his testimony.

Did that represent a commitment to back the $5 billion pledge? Stedman, one of the chief authors of the Senate bill, said later it didn't sound like one to him.

Pittman himself declined to speak when asked as he started down the steps from the Capitol's fifth floor to a meeting somewhere else. Exxon Mobil's lobbyist, Kevin Jardell, a former official in the administration of Gov. Frank Murkowski, tried to use his elbows to prevent a reporter from approaching Pittman to ask the question, saying Pittman was late for the meeting, then directed the question to an Exxon Mobil official in Houston, David Eglinton, who replied in an email:

"Here's our comment. Per today's testimony, Exxon Mobil fully supports both operators, Conoco Phillips at Kuparuk and BP at Prudhoe Bay, in their continued commitment to invest in Alaska and to pursue all additional investments that become viable with meaningful tax reform."

Pittman spoke to the finance committee for about 30 minutes, answering questions but declining to say how the company would respond in the field to specific changes in the tax code.

"I do feel we're woefully behind in attracting that new investment, new development, and without significant changes, we're going to continue on something rough to the same decline (in production), unabated," he said. "At today's oil prices (and) a fiscal policy that encourages development, we should be near record levels of activity in Alaska -- but we're not seeing that."

While some of the other oil company officials got into greater detail, they still stopped short of giving the committee all the information it wanted.

"Can you help us define what 'meaningful' is and 'significant' is?" Stedman asked Damian Bilbao, head of finance for BP Exploration (Alaska). "Can you help us with that, zero us in on the issue?"

"Mr. Chairman, you'll know it's meaningful when you get the results you want -- the results are going to be increased investment, increased production," Bilbao said.

Stedman and other members of the committee agreed that the tax rates in the Senate bill needed fixing, at least when oil prices are high. Stedman suggested that somewhere around $130 to $150 a barrel, the tax rate should stop increasing. That way, oil producers would keep a greater share of the money at those prices -- something like $4 billion a year, said finance co-chair Lyman Hoffman, D-Bethel, if the cutoff was at $130 and the price rose to $150.

"Yes," said Bilbao, "$4 billion is a significant amount of money."

But he and the Conoco Phillips representatives said they wanted to see the change at $100 or less, not $130. Stedman said he wasn't inclined to go down that far. One of the state's consultants said that Prudhoe Bay and other fields were plenty profitable at current tax rates and prices, he said.

Nearly all the testimony and questions dealt with matter of tax, investments, production and the like. But just before the Conoco Phillips representatives concluded their testimony, Sen. Donny Olson, a Democrat and physician from Nome, changed the subject: The committee shouldn't lose sight of what oil from state lands provides for the people of Alaska through oil taxation, especially for its poorest citizens and especially as oil prices rise.

"What I have been told by the constituency that I represent is that as the price of oil goes up, we need more and more help for what the state has the responsibility to give to us," Olson said. "They should look at things like water and sewer, where a significant percentage of people out there still don't have a flush toilet that they can go to. When you have airport maintenance, public safety, education, and the schools, including the clinics for the health care delivery system out there, their mandate to me is, make sure you keep progressivity in place because as the price of oil gets higher and higher out here, we can only afford to buy stove oil in small amounts because we can't afford a full tankful, you make sure we have the ability to have those social services that the state is responsible for out there. That's the reason they're so adamant that progressivity is unchanged, and I think they're correct."

[luckytxn 2,264]

API Study: Investments, Jobs Nosedive In Gulf Of Mexico

By Scott Weeden

The number of rigs that have left the Gulf of Mexico and the slow pace of issuing new permits have resulted in a steep decline in investment and a major loss of jobs.

The offshore drilling moratorium ended in October 2010, however, drilling permit rates remain at historically low levels -- deepwater permits are off by more than half and shallow water permits are down by 40%, according to a study done for the American Petroleum Institute (API).

The study, done by Quest Offshore Resources Inc., showed that total capital and operating expenditures in the Gulf of Mexico were reduced by a combined $18.3 billion for 2010 and 2011 relative to pre?moratorium plans.

"The State of the Offshore U.S. Oil and Gas Industry" reported that the slower permitting cost some 90,000 jobs in 2011, resulting in 11 drilling rigs heading for other regions, such as South America and Africa.

"The economic impacts of the moratorium are still being felt," said Jack Gerard, API president and chief executive officer. "We're not doing what we should be doing to help meet our nation's energy needs, deliver revenue to our government, and create jobs. This is not just hurting people in the Gulf, it is hurting people across the country."

"Energy policy needs a course correction," he emphasized. "Our industry has a vision of an energy future that will support and create millions of jobs and strengthen our energy security. It is based on smart, realistic deployment of all of America's energy assets, including our ample supplies of oil and natural gas."

The report noted, “The offshore oil and natural gas industry in the Gulf of Mexico is a crucial component of the nation’s energy supply. In 2010, over 28% of the oil and 15% of the natural gas produced in the United States was produced in the Gulf of Mexico.

“Offshore oil and natural gas development is also very capital intensive. In 2010, total capital expenditures were estimated at $8 billion, with $5 billion in deep water in excess of 500 feet alone. Total 2010 Gulf of Mexico expenditures, including operating expenses, exceeded $25 billion. This investment provides much needed employment throughout the country, with 2010 total employment supported by the offshore oil and natural gas industry estimated at 230,000,” the report explained.

The report stated, “Prior to the deepwater drilling moratorium, the U.S. oil and natural gas offshore industry was forecast to grow significantly due to identified prospects, mostly in deep water. Since April 2010, eleven deepwater drilling rigs have left the Gulf of Mexico. These rigs have gone to countries such as Brazil, Egypt and Angola.

“Through 2015, the investment in other regions instead of the U.S. associated with these rigs is estimated to be over $21.4 billion, including drilling spending and associated project equipment orders, even accounting for the portion of equipment that will likely be manufactured in the United States.

Not only has the drilling market been slowed, but so has field development.

“The drilling moratorium and slowdown in the issuance of permits have caused significant delays in project development, affecting both independent operators and major oil companies. If current trends continue, it is estimated that 85 shallow-water projects will be delayed over the 2010-15 period. On the current path, 48 deepwater projects are predicted to be delayed,” the report continued.

“If drilling permits going forward were to be issued at pre-moratorium historical rates beginning in 2012, the number of projects delayed could be significantly reduced,” according to the report.

For shallow water, the number of delayed projects would decline from 85 to 37. Delayed projects in deep water would decline from 48 to nine.

“Project delays due to an inability to drill exploration, appraisal and production wells will decrease the net present value of oil and natural gas developments, making the U.S. offshore a less competitive region for offshore oil and gas investment and encouraging the prioritization of foreign investment by operators,” Quest wrote.

If permitting could return to pre-moratorium levels, the study says, by 2017 offshore oil production could increase by about 13 percent over where it is currently headed.

“A return to a more balanced regulatory regime that encourages growth could increase investment in the offshore oil and gas industry by over $15 billion from 2012-15. Additional access to offshore and onshore areas currently off-limits would provide large gains to the nation in terms of energy security, employment and government revenue,” the report continued.

Offshore oil production is also impacted by the slowdown in permits. In 2017, oil production is projected to be 22% lower on the “current path case” than was predicted before the moratorium.

If there was a return to pre-moratorium permitting rates, production in 2017 would be 13% higher in the “best post-moratorium case” due to increased offshore oil and gas drilling.

“The 330,000 barrels per day of increased oil production in 2017 would alone account for over $12 billion less in oil imports in that year at current market rates, significantly affecting the nation’s trade balance and improving its energy security,” the report pointed out.

“The United States remains an attractive location for investment as no other country possesses the combination of high-impact resource plays, an educated and skilled workforce and existing high-technology oil and gas assets already in place.

“Additionally, political stability coupled with a well-developed, technologically advanced offshore oil and gas supply chain suggest that the U.S. offshore oil and gas industry can effectively compete with other world regions.

“However, this outcome is predicated on domestic energy policy that reflects the reality of the international market and the mobility of capital,” the report summarized.

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Buy Ammo!

[Bad_Daddy 2,209]

API Study: Investments, Jobs Nosedive In Gulf Of Mexico

By Scott Weeden

The number of rigs that have left the Gulf of Mexico and the slow pace of issuing new permits have resulted in a steep decline in investment and a major loss of jobs.

The offshore drilling moratorium ended in October 2010, however, drilling permit rates remain at historically low levels -- deepwater permits are off by more than half and shallow water permits are down by 40%, according to a study done for the American Petroleum Institute (API).

The study, done by Quest Offshore Resources Inc., showed that total capital and operating expenditures in the Gulf of Mexico were reduced by a combined $18.3 billion for 2010 and 2011 relative to pre?moratorium plans. .....

They have plenty of permits to drill up here...they just aren't drilling. They want something for nothing and this state is about to sh*t can it's sold out governor and trade out BP and Conoco Phillips for Italian ENI and that Spanish oil company along with some smaller outfits from the states like Pioneer. The oil companies up here have gotten extra greedy and their about to find out what it's like to get the boot for oil companies that will drill and pump our oil.