What Hammond really said: governor must maximize oil benefits for all Alaska citizens

  • By Larry Smith
  • Monday, March 18, 2013 4:57pm
  • News

What Gov. Jay Hammond actually wrote may not be exactly what Sen. Peter Micciche remembered at his town meeting last Friday in Homer.

The senator said he agreed with Hammond that 66 percent of oil income belonged with government. Of course, with ACES, the escalator clause has raised the state take, reduced the industry percentage below one-third and had no affect on federal taxes. What big oil and the senator advocate is reducing the state share one or two billion a year.

But Hammond said: “First, oil taxes must be adjusted to redeem the state’s initially agreed on share.” The state had been shortchanged many billions, according to him, and I think it could well need 20 years of the present tax structure to pay us back.

Hammond again: “Unfortunately, oil interests contribute substantially to the election of many legislators who seem inclined to bow to oil company threats, rather than place the public interest above that of big oil.”

More from Hammond: “However, not long after I left office the Economic Limit Factor (put in place at industry request) was renegotiated to grant oil companies an even better break in light of plunging oil prices that dropped to about $10 per barrel. Unfortunately, however, there was no countering provision to assure that should the price climb monumentally, thereby providing a windfall to operators, an amount of that windfall sufficient to rebalance the three-way split arrangement would blow the state’s way. Instead federal legislation granted an additional share of that pie to the oil companies, resulting in 2004 in roughly 19 percent going to the feds, 27 percent to the state, and a whopping 53 percent to the oil companies. As a consequence the state has been shortchanged. …

“Naturally, oil interests scream in anguish at any proposals that could diminish their take. … Of course there is a point of diminishing returns when one is dealing with golden geese. … After all it is the obligation of oil company CEOs to get the best possible deal for their stockholders. When, as governor, I was asked how much I would tax oil my response was: ‘For every cent we can possibly get. After all, just as it is the obligation of oil company CEOs to maximize benefits for their stockholders, so it is the obligation of the state CEO to do the same for his.'”

Sen. Micciche has worked for ConocoPhillips for 25 years and was asked what the policy of the company was in terms of salary and promotions for employees who run for public office, and serve in public office. This is his situation and he did not answer the question but responded that doctors and fishermen were not asked the same thing and asked why the questioner treated oil so unfairly.

The questioner responded that oil is where the power is in this state … that it was a legitimate question whether he does get a salary while campaigning.

And I think so, too. Now that I look into it, it is actually against the law for corporations to contribute anything of value to candidates for municipal and state offices. The senator was just prior to this election the mayor of Soldotna, the stipend of which he reported as $2,000-3,000 a year, in his campaign disclosure to the public offices commission. He also disclosed that he made himself always available to his constituents.

That hardly comports with fulltime employment with ConocoPhillips for which he is paid between $100,000 and $200,000 as he reports. Clearly his work arrangements provided him something of value pursuing his political career.

And, as CEO of natural gas interests in Cook Inlet, for ConocoPhillips, he does have an obligation to get the best deal possible for his corporation.

He also said it would be nearly impossible that Cook Inlet will meet the demand for gas and a pipeline to the North Slope is needed. A drum roll would be nice here.

ConocoPhillips has the bulk of slope gas and can think of nothing nicer for its stockholders than for Alaska to build them a natural gas pipeline.

One reason Cook Inlet supplies are depleted is 45 years of export to Japan by Conoco’s Nikiski liquified natural gas port. Modernized and improved in recent years during the Micciche watch, it is raring to go. Drum roll.

Homer resident Larry Smith writes that he is an “oil industry victim and benficiary of sorts since 1957.”

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