Contact the Governor
Frank H. Murkowski
Juneau Office
P.O. Box 110001
Juneau, AK 99811
907-465-3500 phone
907-465-3532 fax
State info 907-465-2111
Anchorage Office
550 West 7th Avenue, Suite 1700
Anchorage, AK 99501
907-269-7450 phone
907-269-7461 fax
State info 907-269-5111
Kenai Office
11312 Kenai Spur Hwy, Suite 2
Kenai, AK 99611
907-283-2918 phone
907-283-3037 fax
Mat-Su Office
877 Commercial Drive
Wasilla, AK 99654
907-352-2585 phone
907-352-2526 fax
Fairbanks Office
675 7th Avenue, Suite H5
Fairbanks, AK 99701-4596
907-451-2920 phone
907-451-2858 fax
Washington DC Office
444 North Capitol NW, Suite 336
Washington, DC 20001-1512
202-624-5858 phone
202-624-5857 fax
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Volume 9April 13th, 2006
Alaska Looks to Newfoundland for an Important Lesson
As Governor Murkowski's petroleum production tax moves through the Legislature, he has consistently shared the message that
any changes to the outdated state oil tax must accomplish two things: provide Alaskans with a fair share of oil tax revenue,
compared to what the producers receive elsewhere in the world, and provide incentives for new exploration and development.
More investment means more barrels in the pipeline, more jobs for Alaskans and ultimately move revenue in the treasury. If
passed, this legislation would provide around $1 billion in added revenue each year over the next several years to the state
at current oil prices to pay for education, roads, public safety and other services which all Alaskans rely upon.
The Legislature recognizes that a revised oil tax will bring more money into the state treasury. However, a recent event in
Canada provides a stark reminder of the importance of striking a balance between increased revenues in the short-term, and
maximizing long-term benefits, which the Governor's PPT proposal accomplishes.
As recently as last week, the Canadian Globe and Mail reported a telling story titled, "Hebron tiff raises red flags for oil
firms," which illustrates what happened when Newfoundland did not achieve the necessary balance between the government's desires
and industry's needs.
It states, "Chevron, the operator of the 36-square-kilometre Hebron field, said it is pulling the plug on developing the heavy
oil offshore project. Chevron and its partners -- Exxon Mobil, Petro-Canada and Norsk Hydro -- are grumpy because they say the
rules were changed in midstream."
"The pullout has taken place less than a week after Premier Danny Williams triumphantly tabled a budget showing a modest surplus.
Now, the province's fiscal future is looking a lot less rosy.
"Hebron was to be the fourth big offshore oil project, joining Hibernia, Terra Nova and White Rose in building Newfoundland as
an energy-producing province on its way to becoming what Mr. Williams was calling an "energy warehouse." The Hebron field,
estimated to contain up to 700 million barrels of heavy oil, was expected to be in production by 2012.
"Now, all bets are off….
"The drilling costs alone would have amounted to $1-billion -- so that puts the value of the development at $11-billion. Add
in the cost to build the gravity-based structure -- which was going to take place in Newfoundland -- from which the horizontal
wells would be drilled as well as continuing operating costs and the total forgone benefit to the Newfoundland economy is close
to a whopping $20-billion.
"For a province whose economic prospects aren't exactly optimistic, a loss of this magnitude is a big blow.
"Here's what's puzzling.
"Mr. Williams is a successful businessman. Surely he should understand the basic axiom that markets need certainty, clarity and
continuity. He should also understand what it means to risk capital... Finally, one assumes Mr. Williams knows capital is
mobile, and if terms aren't favourable, companies will go elsewhere.”
The Governor's proposal calls for a 20 percent tax rate on net profits that could bring more than $1 billion annually in revenue
to the state at current oil prices, while providing a stable investment climate for the long term. Let's learn from Newfoundland
and keep the Governor's 20 percent tax rate on net profits.
For information on how to contact your Legislator, please visit this website. For more information on the Governor's petroleum
production tax proposal, please visit the Governor's website.
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