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Democrats to Gov: Stop Touting Existing Oil Industry Commitments as New

JUNEAU - Today Representative Scott Kawasaki and Representative Les Gara called on the governor to stop touting existing oil industry commitments as new when he pitches his multi-billion dollar oil tax giveaway.

“For the last four to five years, the oil industry has reported to the state that these projects are already in their plans, so how can the governor keep repeating that they are new commitments?” asked Rep. Kawasaki, a member of the House Resources Committee. “Industry refused to make commitments on the record, and it really undercuts the governor’s credibility for him to repeat projects as new when he should know they’ve been on the books for years.”

The I-Pad project is the largest of four major projects that comprise the $5 billion of supposed commitments, according to BP’s testimony in Senate Resources on March 1.  At an earlier hearing, Division of Oil and Gas director Bill Barron admitted that I-Pad had been in the Prudhoe Bay plan of development since around 2007.  BP, ConocoPhillips, and Exxon have already been developing this project for at least four years.

In a letter to the governor, Rep. Kawasaki and Rep. Gara highlighted the recent testimony from Division of Oil and Gas Director Bill Barron.

Senator Wielechowski: When was that plan submitted?

Director Barron: This plan for Orion-Borealis, for the I-Pad, definitely last year, and I believe I-Pad has been on part of the plans of development for the last four or five years.

A Plan of Development lists the activity a leaseholder is performing to meet the level of activity required by the state for a company to maintain a state oil and gas lease.

“It’s terrible policy to give away billions in public funds for projects they are already planning to develop,” said Rep. Gara. “And it’s even worse to tell the public it’s new when it’s not.”

According to Director Barron’s testimony later in the exchange about I-Pad, completion of the I-Pad, and the up to fifty new development wells that it comprises, has been delayed for technical reasons, not due to the current oil tax system. The following exchange is from the same Senate Resources hearing.

Sen. Wielechowski:  Have you been told [by industry] that the reason the I-Pad has not gone forward is because of economic reasons or because of technical reasons?

Director Barron: The answer that I’ve been given right now is technical reasons.

Under current law, the state will pay for over 60% of a company’s investment in projects like the I-Pad to encourage this type of investment. ACES is designed to lower both the tax rate and total amount of taxes a company pays to the state when they invest in Alaska.

“Oil companies already have a huge economic incentive to invest in new ways to get more oil from fields they have already developed, which is why this project has been in their plans since we passed our current tax structure,” said Rep. Gara.  “BP says it might take ten years to develop the technology to move ahead with this project.  Giving away $18 billion over the next ten years for a project that was going to move ahead anyway is corporate welfare at its worst.”

“The bottom line is that the companies didn’t make any solid commitments, they’re already doing much of the work the governor keeps touting, and Alaska is already paying for more than half of it,” said Rep. Kawasaki. “If anything, we should be targeting new production, not investments that are already in the works.”

Read the letter from Rep. Gara and Rep. Kawasaki: http://akdemocrats.org/docs/030812_letter_to_gov.pdf

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