Saturday, March 31, 2012

Tax Reform: Who needs it?

Oil tax reform: Who needs it anyway? By Andrew Halcro March 30, 2012: On Wednesday over a thousand Alaskans showed up for a lunch time rally for meaningful oil tax reform. As I looked around the room I asked myself; who are these people and who needs oil tax reform anyway? Honestly, who should care that one in three Alaskan jobs are directly or indirectly related to oil industry. Who should care that those attending the luncheon were engineers, oil & gas subcontractor employees, tele-communication employees, retail store owners, union laborers, freight company employees, trucking companies, construction employees, native corporation employees and more small business owners than you could count? Who should care that oil production is declining, state spending is increasing and by 2020 the Department of Revenue predicts that fifty percent of projected oil production will come from investments yet to be made in a fiscal environment that is currently chasing investment away? Who should care that oil revenues fund everything from classrooms, to courts to cops? Who should care that oil funds organizations like the University of Alaska, which has cultivated professors, whose salaries are paid for by oil revenues, who have been opposing oil tax reform in every major newspaper in Alaska? Who should care that one of those professors got his tail handed to him on this very blog after being caught spreading misinformation to make his case against tax reform? Who should care that the latest proposal by another UAF professor is akin to the Lumpy plan; I'll gladly pay you tomorrow for a hamburger today? And while tax reform opponents use the same Lumpy argument about the producers asking for a tax break today in return for investments tomorrow, over the last six years the legislature has a history of raising taxes retroactively and has proven to be a not so trustworthy bunch when it comes to honoring guarantees. In fact, the state has been the equivalent of a hamburger loan shark. But who should care if the opponents of meaningful tax reform who demand guarantees, are the same ones who told the industry the state didn't need to give guarantees when it came to tax certainty on a $40 billion dollar natural gas pipeline? Think about it. The same lawmakers who are demanding certainty from producers over oil production, are the same ones who refused to grant certainty to the producers for building a $40 billion dollar natural gas pipeline. And who should care that opponents of tax reform have no facts on their side and instead are peddling Alaskans half-truths, revisionist history and down right false information? Who cares that they trumpet oil company profits while bitching about gas prices when the two are mutually exclusive? Who should care? Every Alaskan should care. That's why over one thousand men and women whose job security rests on a healthy oil & gas industry showed up at Wednesday's luncheon rally to support meaningful tax reform. The debate over meaningful tax reform has created a gaggle of opponents who have dug in their heels while offering no legitimate alternatives to boosting production under current tax rates. Furthermore the've purposely glossed over the harsh reality that as oil continues to decline and lawmakers begin dipping into savings, the more state government will be looking at Alaskans pockets to start paying for all the state services they've received for the last thirty years free of charge. The arguments against meaningful tax reform have come from a variety of directions including labor unions who have a vested interest in higher government revenues, hoping they'll translate into more government spending and longtime industry critics like radio mouth Bob Lester who has posted a few videos on You Tube taking a sarcastic look at oil tax reform. And while he talks about "our children's future," he doesn't address that our children will be at risk if production continue to decline thus making investments in education, public safety and roads impossible to keep up with growth and rapidly changing socio-economic demographics. Ironically, Lester is the spokesman for Lithia of Anchorage, an automobile dealership. So with thirty percent of the work force existing due to the oil industry, who does Lester think is buying the trucks and automobiles he hawks on television? I'll tell him. Companies like mine who rent and lease to oil companies and sell cars to Alaskans as well, which in turn generate millions in tax revenues for the state and local governments. Companies like construction contractors who survive off work from the oil industry, and employees who get their paychecks directly and indirectly from employment in the petroleum industry. Those are the folks who are entering showrooms and driving away in shiny new vehicles. Meanwhile in Juneau, a number of red herrings have been caught and mounted by legislative oil tax reform opponents. Audits I n a recent Senate Finance Committee, lawmakers got all twisted up about the fact that the state was behind in their audits. State Senator Bert Stedman (R-Sitka) chastised the Parnell administration for failing to keep current on oil industry audits. Whoa there should look in the mirror first. On October 6, 2007, during the testimony on ACES, Marcia Davis the former Deputy Commissioner of Revenue under Palin, was asked about the states ability to keep audits current. "We have great auditors, but we just don't have enough of them," Davis told lawmakers. Less than two weeks later, International Oil & Gas expert Pedro Van Meurs was testifying in front of the senate and was asked why the legislature shouldn't raise oil taxes for the second time in two years. Van Meurs responded "You haven't even done you first audit under PPT, so you don't have enough information." Even after these clear warnings that the Palin administration and lawmakers ignored, they went on to pass a tax regime that has confused just about every oil company that does business in Alaska. In Palin's fy08 budget not one dime was requested for auditors, nor did the legislature approve an additional funds after hearing twice during the ACES debate that there were simply not enough auditors. In 2008 after a presentation that highlighted the lack of efficiency in the state's auditing division, Palin requested $24 million for more technology and people, but the senate zeroed out their request. But today, lawmakers like Stedman, who ignored the warnings and then vetoed the request for better analytical tools and more auditors, are hot under the collar that the administration is behind on their audits? Please. After all it's just Alaska's economy we're talking about. Oh and the .92 out of every dollar the oil & gas industry contributes to state employee salaries and retirement benefits, along with a few hundred million that benefit the same professors who oppose oil tax reform. But really, who needs oil tax reform anyway? Alaskans who understand the economy,that's who. Read More :

Sunday, March 18, 2012

Arctic OCS reparations

ConocoPhillips files plans for drilling in the Chukchi Sea starting in 2014 By Alan Bailey ConocoPhillips is moving ahead with its plans to drill exploration wells in the Chukchi Sea, starting in the 2014 open water season, Mike Faust, the company’s Chukchi Sea exploration project manager, told the National Marine Fisheries Service’s annual Arctic Open Water meeting on March 8. On March 1 the company filed its Chukchi Sea exploration plan with the Bureau of Ocean Energy Management, Faust said. The agency will review the plan for completeness before publishing it for public review. In February ConocoPhillips filed the corresponding oil spill response plan with the Bureau of Safety and Environmental Enforcement. Devil’s Paw The company’s Chukchi Sea lease positions include two prospects: part of the Burger prospect that Shell plans to drill this year, and the Devil’s Paw prospect. ConocoPhillips has no current plans to drill at Burger but does anticipate drilling one well per year in its Chukchi Sea Devil’s Paw prospect using a jack-up drilling rig, Faust said. Depending on ice and weather conditions, and on drilling progress, it might be possible to drill two wells in a single year, but one well per year is probably a more realistic expectation, he said. “Our plan is to drill one well. We’re going to go out there and be prepared to drill two,” Faust said. In its Devil’s Paw project ConocoPhillips is partnering with Statoil and OOGC, the U.S. subsidiary of the Chinese National Offshore Oil Corp. The Devil’s Paw prospect is located about 120 miles west of the Chukchi Sea coastal village of Wainwright and is about 80 miles from the nearest landfall, Faust said. The prospect is the site of the Klondike well, drilled by Shell into a major Chukchi Sea geologic structure in 1989. Although the Klondike well did not encounter commercial quantities of oil and gas, ConocoPhillips clearly views the geologic setting of the prospect and the results of the Klondike drilling as warranting further investigation at considerable expense. Although previous drilling did not conclusively demonstrate the viability of oil and gas development in the Chukchi Sea, ConocoPhillips believes that there is a good chance of finding the type of very large oil field necessary for commercial success in this remote region, Faust said. “Oil development would lead to significant workforce training opportunities, jobs, careers, increased community investment, and very significant tax revenue for the state and for the (North Slope) Borough,” Faust said, commenting that the necessary supporting onshore pipeline system, for example, would generate property tax revenues. Open water ConocoPhillips will only drill during open water conditions, with the drilling equipment being removed from the drill site should sea ice unexpectedly threaten the drilling operation, Faust said. “We have no plans to drill when there’s any ice on location at all,” Faust said. Based on past ice records, the drilling season should last from mid-July to mid-October, with that October end date allowing time for the drilling of a relief well in the unlikely event of a well blowout — it would likely take about 30 days to drill a well at Devil’s Paw, Faust said. In the interests of anticipating and accommodating any unexpected sea-ice movement, ConocoPhillips has developed an ice alert program, making use of frequently downloaded synthetic aperture radar satellite data to spot ice floes even under a cloud cover or at night. ConocoPhillips plans to use a brand new, state-of-the-art rig, equipped with the latest air emissions equipment and capable of operating in up to four-tenths sea ice cover, even although the rig will not be operating in ice in the Chukchi, Faust said. Ideal location And the location of the Devil’s Paw prospect, relatively far south of the likely summer sea-ice extent and under a water depth of about 160 feet, is especially favorable for a jack-up drilling operation, Faust said. A jack-up rig has huge sliding legs that can be jacked down to the seafloor and then used to lift the rig floor above the maximum height of sea waves. This arrangement creates a stable drilling platform that enables the well blowout preventer and other well control equipment to be located on the rig floor, rather than on the seabed, thus allowing easy access to this equipment, Faust explained. “It’s essentially a land rig sticking up some meters above the sea,” he said. And, being fixed rigidly to the seafloor without the need for propellers to keep it in position, the operation of the rig will be relatively quiet, he said. Capping stack To allow for the possibility of a blowout preventer failure, as happened in the Gulf of Mexico Deepwater Horizon disaster, ConocoPhillips is going to install on the seafloor what is called a “capping stack,” the type of equipment eventually used to seal the spilling Gulf of Mexico well. The approximately 150-ton capping stack, in place from the start of the drilling, with the well string passing through it, will be able to shear through the drill pipe, capping the well at the top of the well casing if necessary, Faust said. “That stack could be triggered from the rig. It could be triggered from a boat,” he said. However, the company does not expect an accident. A well at Devil’s Paw should be very similar in terms of drilling complexity to the more than a thousand wells drilled to date at ConocoPhillips’s Kuparuk River field in the central North Slope, Faust said. “We are constantly drilling this exact same kind of geology,” he said — the three primary drilling engineers working on the Devil’s Paw project have between them more than 90 years of experience. And, with a previous well at the Devil’s Paw location, subsurface conditions are known. ConocoPhillips has also acquired the experience of drilling 50 exploration wells in the Alaska Arctic since 1998, including in some in very remote locations, Faust said. Logistical challenge The logistical exercise of deploying a major Arctic drilling fleet, including all of the necessary oil spill response assets, will be a major challenge, Faust said. At the moment ConocoPhillips is engaged in the detailed planning for the operations and in the procurement of equipment. The company hopes to award all contracts for required vessels and equipment, including the drilling rig, by the end of 2012. “For an operation like this it really does take a couple of years of very detailed planning and a lot of work with all of the different contractors involved,” Faust said. “We have to spend a lot of time planning, ensuring that all of the safety precautions are in place, ensuring that all of the communications and simultaneous activities are really well tied together.” ConocoPhillips has spent much time with North Slope communities and is aware of past concerns expressed by North Slope residents that the oil industry had been moving forward too quickly with offshore development, Faust said. “We’ve really tried to step back and take a paced approach, understand what everyone’s concerns are, address as many of those as we possibly can,” Faust said. “We believe the time is right, now, to step out and actually drill a well.” Environmental studies ConocoPhillips has been involved in offshore environmental studies in the Chukchi Sea since 2006 and is proud of its involvement in the collection of baseline environmental data, Faust said. And in the offshore work that the company has conducted to date there have been no safety incidents and no injuries, he said. During drilling operations marine mammal observers will be stationed on the drilling rig and support vessels, and acoustic recording buoys will detect animals not observed on the sea surface. A monitoring program will determine any impact from permitted discharges from the rig by taking samples from the environment around the rig before, during and after the drilling operations. Some sampling will be done a year after the drilling, although no environmental impact is expected, Faust said. In addition to filing its exploration and spill response plans, ConocoPhillips has filed all of its permit applications for its Chukchi Sea operations, Faust said. The company has also applied for authorizations for the incidental disturbance of marine mammals. “We do believe that it’s appropriate to start working on those applications immediately,” Faust said. “There’s a lot of work that went into building those and we want to make sure that we have a good open dialogue with the agencies, and that … we have those authorizations in hand before we go out and commit hundreds of millions of dollars on equipment.” In early April the company will meet people from the North Slope Borough’s mayor’s office, to go through all of the Chukchi Sea permits in detail — the company will hold similar discussions with any of the North Slope communities that are interested in doing that, Faust said. Petroleum News

Sunday, March 4, 2012

Senators iffy on Obama energy promises

By Eric Lidji

The Senate contingency of the Alaska congressional delegation offered faint praise to reassurances that the Obama Administration would include Alaska in its energy strategy.
In a recent speech at the University of Miami about domestic energy production, President Obama said his administration would “make available more than 75 percent of our potential offshore oil and gas resources from Alaska to the Gulf of Mexico.”
“I am heartened to hear the President talk about Alaska and the Arctic when discussing new sources of American-made energy to create jobs and build an economy that lasts,” Sen. Mark Begich, a Democrat, said in a statement following the speech, adding, “It is correct to say we have made significant progress as Shell’s spill response plan for the Chukchi Sea was approved last week, and we are moving ever closer to an active summer of exploration in the Arctic. But more work needs to be done. We need to continue to move forward on efforts for responsible oil and gas development beneath Arctic waters, the National Petroleum Reserve-Alaska and the Arctic National Wildlife Refuge.”
With the public and politicians once again arguing about the cause of rising gasoline prices, Sen. Lisa Murkowski, the ranking Republican on the Senate Energy and Natural Resources Committee, said any solution must include more domestic drilling.
“While I welcome the president’s stated commitment to develop ‘every available’ energy source and his reluctant acknowledgment that increasing domestic production does help reduce prices, many of his recent comments and his administration’s actions have been disappointing to those of us who have long been working to make energy more affordable,” Murkowski said in a statement. “Higher energy prices have been this administration’s policy goal, or at least been acceptable as collateral damage — as evidenced by its support for cap-and-trade legislation, its barrage of EPA regulations, the bureaucratic thicket it forces producers to navigate, and the tens of billions of dollars in tax hikes it’s attempting to impose on those who produce the energy we depend on.”
She said if the administration is “serious” about affordable energy, it should approve the Keystone XL pipeline, open the coastal plain of ANWR and new offshore areas to drilling, and work to streamline the permitting process and reduce costly regulations.