Tag Archives: ACES

Will ACES Be Discarded?

by Whitney Pitcher

During her CPAC speech last Saturday, Governor Palin included some Alaskan constitutional populism (emphasis added):

If Mrs. Thatcher were with us here today, she would remind us that there is a big difference between being pro-business and being pro-free market. On this there can be no mistake where conservatives stand. It’s time for “We the People” to break up the cronyism and put a stake through the heart of “too big to fail” once and for all.

That includes these resource-rich states like Alaska, my home state. Read your constitution, Alaskans. Realize that the natural resources that God has created for man’s use — they’re not owned by the big multinational conglomerates and the monopolies. They’re owned by the people. They don’t own them, so don’t let them own you. You have a right to those resources to be developed for our use.

Governor Palin rightfully notes two important issues in particular–1) the Alaskan constitution’s charge that development of resources for the good of the people 2) the warning that the people (and politicians) of Alaska  not allow themselves to be owned by the oil companies.

The Alaskan constitution notes that the state’s natural resources belong to the people and are to developed for their maximum benefit :

 The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people.

Governor Palin’s point is especially salient and timely when it comes to Alaska’s natural resources. On Wednesday night, the Alaska state senate passed a bill that if passed in the House and signed by Governor Parnell would overhaul the oil tax reform plan, ACES, that Governor Palin signed into law in 2007. Unlike Governor Palin’s ACES, however, this bill was not discussed in a transparent and comprehensive manner:

 The newest version of the oil tax bill was introduced Thursday. In the hours before it passed there no public testimony. There was no testimony from Alaska’s independent oil explorers. The only industry testimony came from Alaska’s Big Three oil producers, which had been invited to testify.

“It was sort of striking that the oil industry gets a chance for public comment and the rest of Alaskans don’t,” Wielechowski said.

Many of the smaller independent players in Alaska’s oil patch are the beneficiaries of tax incentives aimed at new production from new fields, rather than the strategy pushed by Parnell and championed by legislative leaders of pumping oil, faster, from known fields.

Testimony from the Big Three acknowledged that the oil-tax changes proposed under SB 21 would make Alaska a more competitive tax environment. But they would not promise new production.

One of the positives of ACES is that smaller, independent oil companies have been able to develop in Alaska. In fact, the number of oil tax returns filed with Alaska has increased 383% since ACES was passed. Annual capital expenditures have nearly doubled since FY2007, meaning that producers are engaging in increased infrastructure development (i.e. more rigs) and the like. These expenditures are helping to lead to increased profits for even the major oil companies. For example, in 2012, 13% of Conoco Phillips’s oil and gas development occurred in Alaska, but Alaska contributed to 34% of their income. Additionally, according to Alaska’s own labor statistics, oil and gas jobs increased more than 15% between 2007 and 2012.

So, why is there a push for reforming ACES? Because of the very thing that Governor Palin warned against in her CPAC speech–being owned by the oil companies. In theory, the Senate bill is better for the oil companies because it flattens ACES’s tax rate and provides incentives for new oil. This sounds pro-business, right? That’s what Governor Palin warned about in her CPAC speech as well. There’s a difference between the invisible hand of the free market and the hand-in-hand “pro business” relationship between business and government. This “hand-in-hand” relationship is the very type of relationship that was the impetus for ACES being passed in the first place, as the Murkowski administration prior to Palin’s administration was shrouded in corruption due to the pay-to-play deals between the oil companies and lawmakers. Governor Parnell has not had that kind of relationship in his dealings, but he has had a revolving door relationship between the oil industry and politics. As I wrote nearly two years ago:

In the early and mid 1990s, Parnell served in the Alaska House of Representatives and Senate. Following his time in the Senate, Parnell became director of government relations for ConoccoPhillips. He then went to work for Governor Murkowski as the director state division of oil and gas from 2003 to 2005. During part of this period time, Governor Palin had served as an oil and gas commissioner until she encountered unethical behavior from another commissioner and Alaska GOP chair,Randy Ruedrich, and she resigned and lodged a complaint against Ruedrich. Prior to running for Lt. Governor in 2006, Parnell worked at Patton Boggs, a law firm that represented ConocoPhillips and ExxonMobil in the Exxon Valdex oil spill case.

Although the bill was passed in the Senate, it was proposed at the request of Governor Parnell. He found 11 allies in the Senate, and the bill passed 11-9. One Senator, Peter Micciche, who is also employed as a ConocoPhillips natural gas plant supervisor,  paid lip service support to ACES, indicating he would reject Governor Parnell’s proposal. However, Micciche ended up voting for the modified Senate bill that Governor Parnell applauded.

The Senate bill removed the capital expenditure credits that ACES has, which particularly benefited the smaller companies who were not given the opportunity to testify before the Senate. The credits gave companies breaks on infrastructure development and expansion (e.g. new rigs) and the like, which because of economies of scale, helped smaller companies (with their smaller budgets) be able to grow.  This was another thing Governor Palin noted during her CPAC speech, “if you’re not at the table, you’re on the menu”.  Such may be the case for these smaller companies who were not given a voice in these Senate debates.

ACES has not only helped boost Alaskan jobs and investments by oil companies, it has strengthen Alaska’s fiscal health. ACES has helped create $16.5+ billion in state savings and has contributed to Alaska being upgraded to a AAA credit rating by both Fitch and Standard and Poor’s in the past 14 months. As a House committee begins to discuss this bill today, one would hope that, rather than appeasing the oil companies for increased production that may or may not occur, legislators would look at the economic and overall fiscal benefits that ACES has brought to the state.

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Governor Palin’s Free Market Populism Bests the Boys’ Crony Capitalism

by Whitney Pitcher

Under the false premise that the government can create jobs, the Obama administration is proposing yet another stimulus/jobs bill that would use nearly half a trillion in taxpayer dollars as another supposed attempt to help the American economy. This new jobs bill is considered by some, however, to primarily be a bailout for blue states. This comes on the heels of the Solyndra scandal  where President Obama’s hybrid of crony capitalism and corporatism meant taxpayer dollars went to funding a failed solar panel company with strong ties to his campaign donors. Solyndra is not the only company to fall under the Obama administration’s “too green to fail” mentality when it comes to stimulus funding, as four other “green” companies who received stimulus funding also have gone bankrupt. This loan guarantee program for green companies that was a key component of the 2009 stimulus bill has cost American taxpayers $38.6 billion, but has yielded fewer than 4,000 of the promised 65,000 jobs from the loan program. The stimulus bill as a whole was supposed to prevent unemployment from going above 8%, but instead it has been above 8% since February of 2009.

Additionally, although Governor Romney’s healthcare reform bill was not specifically intended to spur job creation, it’s big  government action has impacted jobs– for the worse. A report published this week estimates that Romneycare has cost Massachusetts more than 18,000 jobs. Beyond their similar approaches to healthcare reform, Governor Romney’s policies and stances are similar to President Obama’s in that he feels that subsidies and corporatism are part of a “pro business/big government” mindset, as his administration offered special technology loans to lure business from other states. As a presidential candidate for 2008 and 2012, Romney has supported both energy subsidies and insurance subsidies, and he still supports TARP—all means of government funnel taxpayer dollars towards business.

Governor Perry, who is touted by many as the “jobs” candidate, may have had a lot of jobs come to Texas during his tenure, but he also implemented “pro business” loans like both President Obama and Governor Romney. Like President Obama, he scratched the back of his political donors at the expense of taxpayers. His Emerging Technology Fund also proved to be a mechanism of reciprocity to his political donors to the tune of 200 million in taxpayer dollars. The Wall Street Journal  reports that one such donor invested more in Perry’s campaign than the company for which they were seeking a grant. Interestingly, the grant was initially denied by a regional committee, but was later approved by a Perry appointed committee:

In 2009, when Mr. Nance submitted his application for a $4.5 million Emerging Technology Fund grant for Convergen, he and his partners had invested only $1,000 of their own money into their new company, according to documentation prepared by the governor’s office in February 2010. But over the years, Mr. Nance managed to invest a lot more than $1,000 in Mr. Perry. Texas Ethics Commission records show that Mr. Nance donated $75,000 to Mr. Perry’s campaigns between 2001 and 2006.

The regional panel that reviewed Convergen’s application turned down the company’s $4.5 million request when it presented its proposal on Oct. 7, 2009. But Mr. Nance appealed that decision directly to a statewide advisory committee (of which Mr. Nance was once a member) appointed by Mr. Perry. Just eight days later, on Oct. 15, a subcommittee unanimously recommended approval by the full statewide committee. On Oct. 29, the full advisory committee unanimously recommended the approval of Convergen’s application. When asked why the advisory committee felt comfortable recommending Convergen’s grant, Lucy Nashed, a spokesperson for Mr. Perry, said that the committee “thoroughly vetted the company.”

This was only one example of the reciprocity between Perry donors and grant recipients. The Dallas Morning News shares this graphic depicting hundreds of thousands of campaign donations from companies who would later receive grant funding from Governor Perry’s initiative:

Governor Palin, on the other hand, realizes that government neither creates jobs, nor is supposed to be a channel to funnel taxpayer dollars back to political donors. She recognizes that government’s role is not to be pro business, but pro market, where through billions of transactions the American public determines the success and failure of business by what they choose to buy, not by what government chooses to subsidize. In her Tea Party speech earlier this month, she spoke of the need for less federal government intervention, not only in less regulation and more federalism, but also in removing subsidies, loopholes, and bailouts—the very things her potential political opponents engage in– from the economic equation (emphasis added):

But here’s the best part: To balance out any loss of federal revenue from this tax cut, we eliminate corporate welfare and all the loopholes and we eliminate bailouts. This is how we break the back of crony capitalism because it feeds off corporate welfare, which is just socialism for the very rich. We can change all of that. The message then to job-creating corporations is: We’ll unshackle you from the world’s highest federal corporate income tax rate, but you will stand or fall on your own, just like all the rest of us out on main street.

Governor Palin knows better than anyone else the need to remove crony capitalism from politics. As she noted on Greta van Susteren’s show earlier this week she has the “bumps and bruises to prove it”. ACES, her oil tax plan, reformed Governor Murkowski’s crony corruption tainted plan that was written to favor certain oil companies and ultimately also led to the arrest of oil company personnel, gubernatorial staff, and state legislators.  ACES was not a behind closed doors deal. In fact, Governor Palin did not allow lobbyists in her office at all.  Instead, it was a plan written and passed in a transparent manner, was presented to the people of Alaska more than two weeks before it was presented to the legislature, and did not involve undue influence from the oil companies.  Following the passage of ACES, Alaska saw a record number of oil jobs during Governor Palin’s tenure.  Not only were the number of jobs increasing, the legislation made development more attractive for other companies beyond the “Big Oil” companies favored by Governor Palin’s predecessor. Since the passage of ACES, the number of companies filing with the state of Alaska has doubled.

Even though a third of Alaskan jobs are tied to the oil industry, Governor Palin’s stellar jobs record extends behind solely that industry. Critics may argue that in an energy rich state, jobs naturally increase during a time when oil prices are high (as was the case during Governor Palin’s tenure) as more energy industry jobs are created. When Governor Palin took office in December of 2006, Alaska was pulling up the rear when it came to jobs, ranking 49th out of the 50 states and Washington D.C. In her first year in office, Alaska was 6th best in improvement in unemployment. By the end of the final year of her tenure, Alaska was ranked 21st in the country. This kind of impressive record on jobs is how Alaska was 2nd best in job growth during her tenure.  Data from the Alaska Department of Labor and Workforce Development, showed that in addition to a 13.7% increase in resource development jobs, Alaska saw a nearly 5% increase in business service jobs and a 6.4% increase in education and health related jobs during Governor Palin’s time in office.

Governor Palin’s record reinforces her rhetoric. Instead of giving companies  millions or billions in taxpayer dollars in an attempt to create jobs or giving preferential treatment to favored companies or campaign donors, Governor Palin sought to remove the ties of cronyism and truly create a level playing field where businesses are neither too influential to fail, nor too small to succeed. This is what separates Governor Palin from all of her potential political opponents who have gained for themselves the moniker of crony capitalist or corporatist. Instead, she is, in the words Jim Pethokoukis of CNBC, a free market populist. This doesn’t make her William Jennings Bryan in skirt railing against big business, but instead a conservative warrior fighting against entangled web of business, political donors, and big government.

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A Busy Upcoming Oil Exploration Season Proves the Success of ACES

by Whitney Pitcher

The Anchorage Daily News shares some good news for oil and gas development in Alaska, due in large part to Governor Palin’s oil tax legislation, ACES (emphasis added):

As Southcentral Alaska prepares for an increase in oil and gas exploration and development in the Cook Inlet basin, operators on the North Slope and nearshore Beaufort Sea are preparing for what promises to be one of the busiest exploration seasons since 1969, when 33 exploration wells were drilled after the discovery of the Prudhoe Bay oil field.

If all goes as planned, as many as 28 exploration wells could be drilled between October 2011 and mid-2012. It’s a longer-than-normal North Slope exploration season because one company’s wells can be drilled from old gravel sites along the Dalton Highway and therefore are not subject to off-road tundra travel restrictions.

Much of the stepped-up activity appears to be partly due to the exploration incentives offered by the state of Alaska, and partly because Alaska’s governor is committed to fixing provisions in the state’s production tax that could make development of any oil discoveries noncompetitive for investment capital with projects in other oil provinces.

The exploratory incentives are a key part of the oil tax legislation championed by Governor Palin, as the legislation included tax credits for companies to both encourage new development and to reinvest in the existing infrastructure of older development. As Governor Palin noted upon signing ACES into law in December of 2007, “[w]ith the signing of this bill, we can turn the page and look forward to a new era of stability and investment opportunities developing Alaska’s resources, creating new jobs and a strong economy for years to come”.

This is exactly what has happened since the passage of ACES. It has given Alaska a strong economy. During her tenure, Governor Palin had the 2nd best job growth record in the country. Every year of her administration yielded a record high number of oil industry jobs in Alaska.  This news of a very busy exploration season indicates that indeed ACES has ushered in a “new era of stability and investment opportunities for developing Alaska’s resources”.

The companies that are involved in drilling these new exploratory wells are mainly independent Alaskan companies and foreign companies. Governor Palin’s ACES oil tax structure replaced Governor Murkowski’s corruption tainted PPT oil tax structure which favored Murkowski’s cronies in the oil industry. Governor Palin’s legislation on the other hand provides opportunity for all companies to be engaged in resource development. This kind of policy is what led to, as of January, a doubling in the number of companies filing taxes returns with Alaska since the passage of ACES, indicating that more companies see Alaska as a great place to invest in oil development. In addition to the incentives for development that ACES provides, it also was negotiated and passed in a transparent manner without undue influence from lobbyists or only certain oil companies.

One of the foreign companies is the Spanish company Repsol, who announced in March that they would be devoting more than three-quarters of a billion dollars for development on the North Slope (emphasis added):

“This deal is a perfect fit in our efforts to balance our exploration portfolio with a lower risk, onshore oil opportunities in a stable environment,” Repsol CEO Antonio Brufau said in a statement.

ACES has provided a stable environment for Repsol to engage in exploratory drilling that includes 5 rigs and up to 15 wells. This speaks well of the state level policies that Governor Palin implemented. Additionally, though, the fact that a Spanish company is seeking to engage in oil development in America may be a result of what Governor Palin warned about at the India Today Conclave speech in April where she discussed the effects of a “green” economy (emphasis added):

So as government locks up land & we lose good jobs in the ‘Conventional Resource’ arena, you may hear that “green jobs” will be the saviour! But look around the world & try telling that to the thousands of English & Scottish workers who’ve lost jobs as a result of government investments in “green energy” projects. A recent UK study shows that for every “green job” created, nearly four jobs were lost elsewhere in the economy due to lack of affordable energy! Same story in Spain – investment in “green jobs” brought massive debt, skyrocketing energy costs & 20% unemployment.

Spain has proven oil reserves of about 150 million barrels. While this is nothing compared to the vast resources available in Alaska, it is certainly worth noting. Between 2005 and 2009, Spain’s oil production volume has decreased by nearly eight percent. Has a focus on “green” energy (leading to reduced oil production) also caused Spanish oil companies to seek development opportunities elsewhere because these areas are a “stable environment” as Repsol said of Alaska? Should not Spain’s example serve as an economic  warning to America as Governor Palin indicated? Will an aversion to traditional fossil fuels development lead American oil companies to explore more profitable options elsewhere?

It has become increasingly evident that Governor Palin’s ACES legislation has done just what she intended it to do—spur economic growth, create jobs, and provide stability and continued oil development.  It has not only provided opportunities for development by the likes of ExxonMobil or Shell, but it has also provided independent companies and foreign companies to invest in exploration. As our current administration seeks to create a “green” economy, the successes of Governor Palin’s administration should cause America to look north to the future in order to truly win the future.

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Governor Palin’s Consistent Fight against Corruption and Crony Capitalism

by Whitney Pitcher

There is a saying from Larry Hardiman that says the word, politics, comes from a derivation from the word “poly” meaning many and “ticks” meaning blood sucking parasites. This may be a tongue-in-cheek saying, but  it rings true for those who are tired of the dishonesty and tone deafness of politicians. Politicians who campaign with soaring rhetoric and lofty promises, yet fail to deliver when they get to their state capitals or to Washington D.C.. Politicians who try to set themselves apart as women and men of character, yet fail prey to the temptations of pay-to-play politics and back room dealings when they are elected. Politicians who campaign on reform of government, but give in to the temptations of corruption and seize the opportunities to grasp the power of picking winners and losers. This is why a citizen candidate has become so attractive to many. Many Americans wish to see a man or woman who is unadulterated by the influence of political power and unaffiliated with governmental cronyism. It is very rare to find someone who has defied the normal outcomes of political life by taking on corruption, making transparency a cornerstone of his or her agenda, and calling out the crony capitalism and crony corporatism that is so pervasive in today’s politics by actually fighting all of these ills from the inside. However, it seems that Governor Palin is who has indeed done that–both in word and in deed.

Although Governor Palin currently holds no political office, she has made a point on multiple occasions to call Washington D.C. out on their corruption. In April of 2010, during the discussions of a financial reform bill, Governor Palin highlighted how lobbyists from the financial industry flocked to D.C. and discussed how such reform would allow regulators to pick winners and losers:

Moreover, the financial reform bill gives regulators the power to pick winners and losers, institutionalizing their ability to decide “which firms to rescue or close, and which creditors to reward and how.” Does anyone doubt that firms with the most lobbyists and the biggest campaign donations will be the ones who get seats in the lifeboat? The president is trying to convince us that he’s taking on the Wall Street “fat cats,” but firms like Goldman Sachs are happy with federal regulation because, as one of their lobbyists recently stated, “We partner with regulators.”

They seem to have a nice relationship with the White House too. Goldman showered nearly a million dollars in campaign contributions on candidate Obama. In fact, J.P. Freire notes that President Obama received about seven times more money from Goldman than President Bush received from Enron. Of course, it’s not just the donations; it’s the revolving door. You’ll find the name Goldman Sachs on many an Obama administration résumé, including Rahm Emanuel’s and Tim Geithner’s chiefs of staff.

More recently, Governor Palin has challenged the Obama administration and Congress for the revelation that 20% of Obamacare waivers given out in April were given to Congresswoman Pelosi’s district calling such distribution of waivers “corrupt” and calling anyone who supports the Obama-Pelosi-Reid agenda of centralized government takeovers and crony capitalism as “complicit”. In her appearance on Eric Bolling’s show, Hannity, On the Record, and Judge Janine’s show last week, she reiterated her stance on this issue, also highlighting that Senator Reid’s state of Nevada also received a waiver as did AARP, who lobbied very hard for the passage of Obamacare. Governor Palin also challenged Congressman Issa and others in Congress to investigate the suspect selectiveness of these waivers. In fact, the Department of Health and Human Services has only released information on those who received waivers, not those who were denied waivers. So much for the most transparent administration ever.

Governor Palin’s strong stance against crony capitalism, bureaucrats picking winners and losers, and a lack of transparency is not just words; it’s action. In her comments about last year’s financial reform bill, Governor Palin highlighted several key points of her administration:

We need to be on our guard against such crony capitalism. We fought against distortion of the market in Alaska when we confronted “Big Oil,” or more specifically some of the players in the industry and in political office, who were taking the 49th state for a ride. My administration challenged lax rules that seemed to allow corruption, and we even challenged the largest corporation in the world at the time for not abiding by provisions in contracts it held with the state. When it came time to craft a plan for a natural gas pipeline, we insisted on transparency and a level playing field to ensure fair competition. Our reforms helped reduce politicians’ ability to play favorites and helped clean up corruption. We set up stricter oversight offices and ushered through a bi-partisan ethics reform bill. Far from being against necessary reform, I embrace it.

One of the key pieces of her gubernatorial legacy was ACES–an oil tax structure that replaced the corruption tainted tax structure of the previous administration capped by the indictment of legislators, gubernatorial staff, and oil company employees– was inline with the state constitution, and provided tax breaks for oil companies engaging in capital improvements. As I wrote in a post in March, this legislation was passed in a transparent manner:

Governor Palin released a draft of the bill 17 days before the Special Session to enable both the legislature and the public to read the proposal prior to its discussion in the legislature. Her oil and gas team also held a series of briefings throughout the state prior to its discussion in the Special Session to allow the people of Alaska to be informed about the proposal. The bill was passed very easily in both the House and the Senate with bipartisan support before Governor Palin signed it in December of 2007. In signing this bill, Governor Palin removed the taint of corruption from taxation negotiation process and submitted a strong piece of legislation ensuring that the people of Alaska received their “clear and equitable share” as shareholders in the resources of the state.

Additionally, the Alaska Gasline Inducement Act (AGIA), her transcontinental gasline project, was negotiated in a transparent manner as well. In fact, her administration made gasline proposals available for public consumption, which was a 180 degree difference from the back room dealing of the previous administration. One of her gubernatorial campaign pledges was to put the state’s checkbook online so that constituents could see how state monies were being spent, and this is something she fulfilled. Governor Palin’s mention of challenging one of the world’s largest corporation referred to her administration challenge of ExxonMobil for sitting on their drilling leases and not fulfilling their contracts with the state. This firm stance also brought drilling to Point Thomson by ExxonMobil for the first time in more than 25 years. Additionally, as Governor Palin mentions, she signed bipartisan ethics reform into law as well.

Citizen candidates do indeed bring a fresh perspective to a campaign and even to public office. However, there is something to be said for someone who took on corruption while in elected office. Such an individual has governed or legislated in an atmosphere of corruption, back room deals, and cronyism and has not only weathered such an atmosphere, but has effected change for the better. It is one thing to act as a citizen watchdog; it is another to make sure that legislation and projects are transparent and are void of back room deals and crony capitalism. Governor Palin is such a person.

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The Lingering Influence of Crony Capitalism and Big Oil in Alaskan Politics

In recent posts, I discussed how Governor Palin’s key legislative victory, Alaska’s Clear and Equitable Share (ACES) , has been a transparent, constitutionally-based, pro-growth success. In 2007, Governor Palin signed into law ACES, an oil tax structure that includes incentives for development and investment in capital improvements and ensured that Alaska’s resources would be developed for the maximum benefit for the people of Alaska as per their state constitution. The Alaska constitution states that the state’s natural resources belong to the people of Alaska. In essence, revenue derived from oil development belongs in part to the people of Alaska who, as owners of the resources, are due their share of the profits as “shareholders”. Beyond this, ACES also replaced Governor Murkowski’s Petroleum Profits Tax (PPT) which was tainted by crony capitalism and corruption and lead to the arrest and conviction of state legislators and Governor Murkowski’s chief-of-staff due to the ties between PPT negotiations and VECO Corp, a oil and gas pipeline company.

ACES has been a success for both the people of Alaska and the oil companies. In a recent Facebook post, Governor Palin highlighted how the revenues of ACES have benefited the people of the Alaska and have made the state financially sound, as it has helped provide a $12 billion state surplus, put billions is savings, pay down underfunded state pension plans, and forward fund education. ACES has proven to be a success for oil companies as well. ACES has contributed to oil job increases, high profits for industry, a record high numbers of oil companies drilling in Alaska, and increased capital development by oil companies spurred by $3 billion of tax incentives. Alaska now has the second best business tax climate in the country, moving up two spots since the passage of ACES.

In the previously referenced Facebook post, Governor Palin brushes off current criticisms of ACES and refers to desires by some to make changes to ACES as “political posturing”. A bill that would alter the ACES tax structure (HB 110) was passed by the House last week. However, this bill does not even remove the progressivity of ACES–the main criticism from detractors. It solely caps the progressivity. In fact, it changes the calculation period for the tax, and it does not account for volatility of oil prices. It is estimated that such a plan could cost the state $100 to $200 million a year. With a constitutionally sound oil taxation structure that has proven to benefit both the Alaskan people and the oil companies, why might Alaskan legislators and Governor Parnell seek to do away with ACES?Are oil companies and crony capitalist Alaskan politicians using the current political climate (and the anti-oil agenda by the current President) as a springboard for altering the oil structure?

A chorus of voices has risen in support of making changes to ACES, but where are these voices coming from? Are these merely echoes of the corruption of the past? Former Republican Alaskan House member, Ray Metcalfe, indicates that this is likely the case. Metcalfe was instrumental in exposing the impropriety between Alaskan legislators and VECO. He highlights that former VECO spokesman, Paul Jenkins, has been given free rein to write op-eds in the Anchorage Daily News (ADN) in support of making changes to ACES; his most recent ad hominem, snark ladden piece was published Saturday. Prior to the exposure of the VECO scandal, Jenkins wrote paid op-ed advertisements in support of VECO in the ADN before the scandal prompted the ADN to stop running the ads. Paul Laird, former BP spokesman, has also been involved. He was general manager of the Alaska Support Industry Alliance until last July. The Alliance has been pushing hard for changes to ACES as well, including pushing an ad campaign that shared the stories of those supposedly negatively affected by ACES. During the 2010 election cycle Laird donate money to three House members’ campaigns. All three of these legislators voted in favor of the new tax structure last week. Current Alliance General Manager, Rebecca Logan, also donated money to a legislator who supported the change to ACES and to Governor Parnell, who also has pushed for changes to the ACES.

Despite supporting ACES while serving as Lt. Governor, Parnell has pushed for changes to ACES since February of 2010. Governor Parnell (while governing conservatively on budgeting, earmarks, and Obamacare, advocating for the 10th amendment, and supporting Governor Palin’s gasline project, AGIA) has a revolving door career between politics and the oil industry. In the early and mid 1990s, Parnell served in the Alaska House of Representatives and Senate. Following his time in the Senate, Parnell became director of government relations for ConoccoPhillips. He then went to work for Governor Murkowski as the director state division of oil and gas from 2003 to 2005. During part of this period time, Governor Palin had served as an oil and gas commissioner until she encountered unethical behavior from another commissioner and Alaska GOP chair,Randy Ruedrich, and she resigned and lodged a complaint against Ruedrich. Prior to running for Lt. Governor in 2006, Parnell worked at Patton Boggs, a law firm that represented ConoccoPhillips and ExxonMobil in the Exxon Valdex oil spill case.

Additionally, Parnell’s 2010 election donations came from those with ties to special oil interests who may have a stake in any changes made to ACES. One of these donors was Kevin Jardell, who had a managerial role in Governor Murkowski’s administration and has worked as a lobbyist for ExxonMobil (as a side note, that linked article also notes that Governor Palin did not allow lobbyists in her office). Jardell, in addition to Camden Toohey, made the highest individual donations to Governor Parnell allowable by Alaska election laws. Camden Toohey has had a revolving door career as well–working as lobbyist, then in President Bush’s Interior Department, and now working as a legal adviser with Shell. With the EPA red tape tying up Shell’s drilling in the Arctic until 2012, would Shell have a particular interest in potential changes to ACES as federal restrictions are reducing their profits?

Governor Parnell is not the only one with donors who may have a vested interested in changes to ACES and have ties to the corrupt oil taxation processes of the past. Rep. Anna Fairclough’s, who headed up the HB 110 efforts, greatest percentage of 2010 election funding came from energy and natural resource industry including BP and ConoccoPhillips. BP and ConoccoPhillips spoke before the House Resource committee in February to advocate for the proposed changes to ACES. Another proponent of this bill is Rep. Mike Hawker ,who is no friend of Governor Palin and is one of the charter members of the Corrupt B*****s Club (CBC), the name corrupt and boastful legislators gave to themselves because of their embrace of their own corruption. Hawker, in addition to Rep.Chenault, were two legislators who voted for HB 110 and who received tens of thousands in campaign donations from VECO executives. Hawker and Chenault voted for Governor Murkowski’s corruption tainted PPT and against Governor Palin’s ACES. Suffice it to say, the CBC is still kickin’ in Alaska politics, perhaps now with some new inductees.

HB 110, touted by Governor Parnell and supported by a majority of Alaskan House members, does not appropriately address the criticism of ACES’s progressivity, does not deal with the volatility of oil prices, and is likely to reduce state revenue by hundreds of millions of dollars. Beyond that, the proponents of this bill have a history of engaging in crony capitalism, corruption, and unethical behavior. While it is unlikely that Senate version of the bill is unlikely to pass, Governor Parnell supports changes to ACES, and there is the potential for such a bill to be taken up again next year. These are the very things that Governor Palin has fought against her entire political career. Governor Palin has called out the unethical behavior of Alaska GOP chair Randy Ruedrich when she was an oil and gas commissioner. She implemented corruption free ACES project that was passed in a transparent manner without the outside influence of oil companies. She championed the AGIA pipeline project that was negotiated in a transparent manner. She has called out the Obama administration on their pervasive crony capitalism. Should she run for President in the future, there’s no doubt she would continue to strive to rid government of corruption; stop the revolving doors between the private sector, lobbying, and government; and end the behind-closed-doors negotiations that have been pervasive for years in Washington. For Governor Palin, phrases like “walking the walk, not just talking the talk” and ” no more politics as usual” are not platitudes, they’re the way she’s lived her political career.

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Sarah Palin: NY Times, There You Go Again!

By Gary P Jackson

The New York Times ran a story on Sarah Palin, and as usual, got most of the facts wrong. Though there is a lot more to come, Mama Grizzly herself has a few choice words for the editors at the Times: [emphasis mine]

The New York Times just can’t seem to get much of anything right lately. No wonder they’re facing economic and reputation woes. Their article today falsely reporting on my record as governor is full of spin, and I shall call them out on it.

Regardless of the recent political posturing, ACES (Alaska’s Clear and Equitable Share) is a success for all stakeholders who want more domestic energy supplies for our great country. The Alaskan people (who collectively own the natural resources, via our state constitution), the resource producers who bid on the right to develop our oil and gas, and consumers all benefit under ACES. It incentivizes production and development. It works.

Amazingly, to the uninformed (or to those who really don’t want to incentivize oil exploration in America) ACES is spun to sound like an oil windfall profits tax and its progressivity is made to sound excessive. In reality, it was born of a need to have a tax structure that did three things:

1. It could not be created under a cloud of political corruption and self-dealing like the former Alaska administration and legislature’s PPT oil valuation structure. That’s a critical fact that is now frequently overlooked years later. Remember the legislators and oil industry players who went to jail because of bribes leading to votes in favor of the former administration’s PPT, which was unfairly tilted in favor of the resource producers against the resource owners (i.e., the people of Alaska)? Have we conveniently forgotten the fact that a corrupt process brought forth PPT, and I and others set out to change it by cleaning up the corruption?

2. It had to align the interests of Alaskans and the oil producers through exploration and production credits in partnership so that they benefit proportionally from commercialization of Alaska’s sovereign resources. This is very different from a government overtaxing personal or corporate income in which the government has no ownership stake in whatever it is that is being taxed.

3. It had to use a progressivity system that protects the producers from commercial strain when oil prices are low; otherwise the producers would seek development opportunities elsewhere. ACES does incentivize industry, but beware that Big Oil will always do what it does best for its shareholders: it will look out for its bottom line and always claim that it needs even more tax breaks. More power to them for trying, but resource owners deserve A CLEAR and EQUITABLE SHARE (ACES) of the value of their commonly-owned oil and gas.

ACES accomplished all three. The current criticism of this fair valuation makes no real sense. As an article at Big Government notes:

The number of oil companies filing with the Alaska Department of Revenue has doubled indicating that competition has indeed increased. Alaska has the second most business friendly tax set-up — up two spots since the passage of ACES. Additionally, a report from Governor Parnell’s Department of Revenue indicated that 2009 yielded a record high in oil jobs. Even more recently, the newest employment numbers from Alaska show that oil job numbers were higher in January 2011 than in January 2010, indicating that jobs are growing at the seasonal level. Parnell argues that state revenues are in jeopardy, but it is estimated that his proposal would reduce revenues by $100-200 million.

Most importantly, Alaska enjoys a $12 billion surplus thanks to ACES and the sound fiscal policies of my administration. I put billions of dollars aside in savings accounts (though I could have easily spent those billions and made a lot of friends with big-spending legislators on both sides of the aisle), and I continued to veto excess spending and Obama stimulus funds, and chopped earmarks by 86% – much to the chagrin of liberal legislators who were used as “sources” in the article. It’s kind of amusing to see state legislators claim credit for the surplus when they didn’t vote for ACES, and they cried to high heaven when I vetoed their wasteful spending on their special interest projects.

Of course, I could have made a lot more friends in Juneau if I had spent the surplus. But I chose to put billions in savings for a rainy day and return a portion to the people of Alaska. (It was their money after all.) I paid down hundreds of millions of dollars into our under-funded state pension plans, then set aside another billion for forward-funding education. I fought the union’s demands for more benefits, engaged in hiring freezes, and cut frivolous state expenditures – again, much to the chagrin of those who spend other people’s money recklessly. That’s sound fiscal policy. I’m proud of it, and Alaska is stronger today because of it.

Now, if others would like to claim credit for it, that is fine. As Ronald Reagan used to remind us: “There is not limit to what a man can do or where he can go if he doesn’t mind who gets the credit.” Amen!

But let’s not pretend that ACES wasn’t a key factor in the surplus, and let’s not pretend that it hasn’t been a success.

As for AGIA, our long-awaited natural gas pipeline project is moving along according to plan. A huge partnership was developed with Exxon and TransCanada when I put the project out for competitive bids, instead of using behind-closed-door schemes that would have screwed the public. Alaska will help America become energy independent, despite anti-energy politicos claiming AGIA won’t work. It’s already got the 50-year dream off the dime and in the works. See, competition works. So does a transparent process.

~ Sarah Palin

Sarah’s ACES program revolutionized the way Big Oil did business with Alaska, weeded out massive corruption, and not only put more money in the Alaskan people’s pockets [by law they own the oil] but also made it easier for the oil companies to make money. It was a huge win-win for everyone concerned.

The radical left and the Republican establishment are working overtime to do anything and everything they can to stop Sarah Palin before 2012. Frankly, we can understand why the left wants to stop her. Sarah Palin is the greatest threat to radical Marxism the left has ever known. Sarah has the ability, and the backing of the American people, to stop the Marxist ideology dead in it’s tracks. And not just stop it’s forward progression either. She has the ability to send the radical packing. To end their ability to influence policy.

Of course, the Republican elites know Sarah will take them on as well, just like she did in Alaska. That’s why the GOP and their errand boys are spending more time attacking Sarah, and other Common Sense Conservatives, than going after the real bad guys: Obama and his band of Marxist thugs.

The 2012 election is going to be something like we have never seen. In a lot of ways, it will be like 1980. Reagan not only had to defeat Jimmy Carter, and the media, he too had to defeat the Republican elites. These Republicans, were so afraid of losing their little power bases that even after they forced George H.W. Bush on Reagan as V.P., they STILL ran Illinois Congressman John Anderson, as a 3rd party candidate for president!

In 2012, Sarah Palin will not only have to defeat Barack Obama and his media partners, but the “good old boy” Republican elites as well. These establishment hacks, who are just as responsible for the mess we are in as the democrats, must be soundly defeated. They won’t go without a fight.

Sarah took on the “good old boys” in Alaska and ripped them to shreds. We have no doubt she can bring her A game with her in 2012 and do the same thing on a national level.

Won’t be easy though. We’ll all have to do our part to make it happen.

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Governor Palin, the Success of ACES, and the Defeat of Corruption Part II

by Whitney Pitcher

One of Governor Palin’s key pieces of legislation–Alaska’s Clear and Equitable Share (ACES), legislation outlining a tax structure for oil companies– has come under attack from Alaskan politicians, oil companies, and the press as a means of undermining Governor Palin’s gubernatorial legacy. Over a series of posts, we will highlight the foundation and principles on which ACES was developed, the success in oil development the legislation brought, and the players involved in attacking Governor Palin’s cornerstone pieces of legislation. The first post in this series, which discussed the anti-corruption, pro-growth principles that molded the legislation and the transparent process in which it was passed, can be found here. This second post in the series will highlight the success of ACES since its passage more than three years ago.

With the signing of this bill, we can turn the page and look forward to a new era of stability and investment opportunities developing Alaska’s resources, creating new jobs and a strong economy for years to come.

Governor Palin upon signing ACES into law

More than three years following the passage of this bill, Governor Palin’s assertions regarding ACES have come to fruition. ACES has created a stable environment for investment and development of oil and has provided a boost to Alaskan jobs and the economy, while concurrently boosting state revenue. In short, ACES has been a success.

In the year following the passage of ACES, the number of oil wells in Alaska increased, indicating that ACES created a favorable environment for development. From the year prior to the passage of ACES to 2009, capital investment on the North Slope increased 33% to $2.2 billion, indicating that oil companies are making investments in future development. More recently, a poll of petroleum executives indicated that a greater percentage of executives thought that ACES “promoted investment” than 2/3 of the 24 other states who were included in the survey. Earlier this month, a Spanish oil company, Repsol, announced that it would be devoting more than three-quarters of a billion dollars to North Slope exploration (emphasis mine):

“This deal is a perfect fit in our efforts to balance our exploration portfolio with a lower risk, onshore oil opportunities in a stable environment,” Repsol CEO Antonio Brufau said in a statement.

ACES has been beneficial to oil companies of all shapes and sizes. In fact, since the passage of ACES, the number of oil companies filing tax returns with the state of Alaska has doubled indicating that more and more companies are seeking to develop in the state. Actually, Alaska has the second most favorable business tax climate in the country, moving up two spots since the passage of ACES. In fact, since 2006, the state of Alaska has given $3 billion in investment incentivizing tax breaks to oil companies. ACES taxes net profits rather than gross revenues (like Governor Murkowski’s oil tax structure) and offers tax credits to oil companies, which yielded high profits for large oil companies like ConocoPhillips and high praise from smaller oil companies. In fact in the year following the passage of ACES, ConocoPhillips Alaskan oil production accounted for 29% of its worldwide income despite only accounting for only 12% of its output. The flexibility of ACES’ taxation mechanism in conjunction with changes in oil prices has proven to be beneficial to ConocoPhillips as well. When oil prices dropped in 2009, their Alaskan profit’s percentage was higher than in 2008 when oil prices were high, ranging from 35-55% of their total profits in the first three quarters of 2009. Additionally, Former Republican Alaskan legislator, Ray Metcalfe, highlighted that ACES provides a much lower risk for development and 10 times the profit per barrel for oil companies in Alaska compared to oil rich Iraq. Current Alaska state senator Bill Wielechowski spoke to Bob and Mark in February about how ACES has benefited both oil companies and the state of Alaska (H/T Kelsey):

In addition to the benefits ACES provides oil companies, ACES has proven beneficial to the people of Alaska–both in the way of jobs and state revenue. After all, the compass that guided Governor Palin in this effort was the Alaska constitution, which stated that resource development must be done for the maximum benefit of the people. Oil jobs have increased since the passage of ACES with 2009 bringing a record high number of oil jobs. Additionally, even in spite of the economic recession in recent years, Alaska’s job market, with 1/3 of jobs related to the oil industry, has remained strong. Alaska’s unemployment numbers have remained lower than the national average since 2009. Alaska’s economy ACES has also generated more revenue for the state since its passage than the previous two oil structures would have under current oil prices and production. Such revenue helped allowe Governor Palin to put $5 billion in state savings and forward fund education while she was governor. Additionally,a portion of oil revenues provide Alaskans, as resource owners, with a permanent fund dividend, which is essentially akin to stockholders receiving their share of a company’s profits.

When Governor Palin signed ACES into law, she asserted that this legislation would provide stability, spur investment and development, strengthen the economy, and create jobs. By all accounts, Governor Palin’s assertions ring true, and her detractors must eat crow once again.

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Governor Palin, the Success of ACES, and the Defeat of Corruption–Part 1

by Whitney Pitcher

One of Governor Palin’s key pieces of legislation–Alaska’s Clear and Equitable Share (ACES), legislation outlining a tax structure for oil companies– has come under attack from Alaskan politicians, oil companies, and the press as a means of undermine Governor Palin’s gubernatorial legacy. Over a series of posts, we will highlight the foundation and principles on which ACES was developed, the success in oil development the legislation brought, and the players involved in attacking the Governor Palin’s cornerstone pieces of legislation.

Governor Palin’s political career has been marked by a consistent efforts to rid Alaska of corruption, remove pervasive crony capitalism, and make government more transparent. Her proposal of Alaska’s Clear and Equitable Share is an excellent example of her reaching all three aims. Under her predecessor, Governor Murkowski, the Petroleum Profits Tax (PPT), a oil tax scheme, was implemented. PPT taxed oil companies 22.5% of their net profits, compared to the 10% tax on gross revenues that was previously in place. A tax on net profits was intended to encourage development and production. However, this legislation had two major problems: corruption and failure to both bring in sufficient revenue and increase development.
The passage of PPT in September of 2006 was later found to be marred by extortion, bribery, and conspiracy. Three state legislators were indicted in May of 2007. Two of these individuals were later convicted and sentenced (one is still being dealt with in the courts) on corruption charges for their improper dealings with the oilfield company, VECO, in passing PPT. Governor Murkowski’s chief of staff, Jim Clark, also later plead guilty to conspiracy for hiding campaign contributions to Murkowski’s campaign from VECO. Prosecutors charged that that Clark used his position to push for the tax rate preferred by VECO–PPT. Suffice it to say, PPT’s passage was tainted, which contributed to the Palin administration’s reasons for re-visiting this tax structure. Additionally, Governor Palin tasked the Alaska Department of Revenue with evaluating PPT’s generation of revenue and industry reinvestment. This report found that revenues were lower than anticipated (to the tune of $800 million lower), operational and capital costs were higher, and tax credits were not effectively spurring production and development.

Following this report, Governor Palin introduced a new tax structure that not only addressed the problems of the PPT, but also had its foundation in the Alaska state constitution, which states that resources must be developed for the maximum benefit of the people of Alaska:

The new plan, called Alaska’s Clear and Equitable Share, or ACES, is a hybrid of a gross and net tax system. It includes a minimum 10 percent tax based on gross receipts for the North Slope’s legacy fields with a 25 percent net tax to encourage new development and reinvestment in existing infrastructure. ACES also allows for tax credits on future work. It restricts capital expense deductions to scheduled maintenance and implements strong audit and information sharing provisions.

As James P. Lucier described in the Wall Street Journal, Governor Palin’s plan accounted for fluctuation in oil prices and provided incentive for development:

As a new governor in 2007, Mrs. Palin stepped in to address the fiscal crisis and restore accountability. Working with Democrats and Republicans alike, she chose a 25% profits tax. But in lean years the state reverts to a 10% gross revenue tax on legacy fields that do not require massive continuing inputs of new capital.

Relative to the old system, Mrs. Palin’s plan — called “Alaska’s Clear and Equitable Share” (ACES) — improves incentives for developing new resources. It ensures the state does well in boom times — as it is doing now — when oil prices are high. But it also hedges against low prices in the future by ensuring that oil companies exposed to commodity price swings don’t face a crushing tax burden when commodity prices fall.

Her plan includes an escalator clause that gives the state a larger share of revenues when oil prices rise. This is common to production-sharing agreements all over the world.

Governor Palin released a draft of the bill 17 days before the Special Session to enable both the legislature and the public to read the proposal prior to its discussion in the legislature. Her oil and gas team also held a series of briefings throughout the state prior to its discussion in the Special Session to allow the people of Alaska to be informed about the proposal. The bill was passed very easily in both the House and the Senate with bipartisan support before Governor Palin signed it in December of 2007. In signing this bill, Governor Palin removed the taint of corruption from taxation negotiation process and submitted a strong piece of legislation ensuring that the people of Alaska received their “clear and equitable share” as shareholders in the resources of the state.

One common misconception regarding this piece of legislation is that it is a windfall profits tax that hurts industry. In reality, such a tax is a severance tax, and its basis is constitutional. Rob Harrison addressed the former misconception in a post in June of 2009 in which he referenced a piece characterizing Palin’s ACES legislation as a severance tax:

State severance taxes charged on production of oil and gas and minerals are common throughout the United States. Also sometimes called “production taxes,” they’re charged by the state from beneath whose land valuable resources are extracted, and they’re designed not to punish the energy companies, but to recompense the state for its loss of a non-replaceable resource — one that must be quantified and taxed upon removal, if it is ever to be taxed at all. Severance taxes are therefore based on production from within the state, not on profits earned by the company extracting that production — even though the production may be measured in, and the tax assessed upon, the market value or gross revenues (as measured in dollars) received for that production, rather than an “in kind” delivery to the state in barrels or cubic feet as such. See, e.g., Tex. Tax Code §§ 201.051 & 202.051 (Texas production taxes on gas and oil respectively).

It is not a windfall tax, as championed by liberals to capture even greater revenue during periods of larger profits. Instead, it is a tax that is levied on production and the loss of a resource. The state revenues generated by ACES , just as its name states ensure Alaskans receive their “clear and equitable share”.

More than three years later, why does this matter? It matters because Governor Palin’s record continues to be either ignored, misrepresented, or attacked. Governor Palin’s record is based on transparency and integrity, and she ensured that her administration did what was best for the people of the Alaska. When ACES was passed, it wasn’t a result of undue influence from oil companies, but it wasn’t a punitive tax aimed at the oil companies either. It was done in such a way that the people of Alaska received optimum benefits and the oil industry was encouraged to produce and develop. It has achieved those goals. Stay tuned for discussion of the success of ACES in boosting state revenue while increasing development, growing oil jobs, and allowing for a good business environment for both small and large oil companies.

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