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Is BP cutting production to blackmail Alaska?

Posted: March 5, 2013 - 4:04pm

The San Francisco Chronicle, the Houston Chronicle, and the Fairbanks News Miner reported that BP’s tankers sometimes return to Valdez with millions of gallons of Alaskan oil on board. They top-off and return to West Coast refineries too full to receive their load. BP’s West Coast, refining, and retail capacity is maxed. Their Valdez holding tanks are 90 percent full. BP is using tankers for on time as needed delivery to meet the maximum market share of BP’s West Coast refined products.

Alaska’s oil has been BP’s cash cow since their subsidiary Sohio Petroleum was their face in Alaska. I was in the 1981 legislature when the biggest tax break giveaway ever, a tax system nicknamed ELF, was voted on. Prior to voting, an oil lobbyists told me they were losing so much money on their Alaskan investments, they were considering shutting down and leaving. Sound Familiar?

Shortly after voting for ELF, I uncovered a well hidden letter to stockholders from Sohio’s president. He explained that Sohio was practically drowning in cash before we gave them their 1981 tax break. I copied that letter and distributed it to all legislators and soon thereafter became the first political target of BP’s surrogate VECO.

In the mid 1980’s it became obvious that other countries were getting far more for their oil than we; even countries with expensive deep water platforms were making more.

Between 1980 and 2000, BP went from the 13th largest oil company in the world to the 3rd largest. They did it with profits that rightfully belonged to Alaska. Profits that would have built roads and fattened dividend checks had it not been for VECO’s bribery, and the fraudulent representations of their lobbyists. A jury might find that oil companies owe Alaska a few billion dollars if they had the chance.

Before acquiring ARCO, BP successfully asked congress to lift the ban on the export of

North Slope crude. As demonstrated by their returning to Valdez with oil on board, BP’s incentives changed to the more profitable business of refining and retailing when they acquired ARCO’s West Coast refineries, and retail stations. If BP were interested in exporting crude they wouldn’t be returning it to Valdez.

BP controls Alaskan crude from the well head to the gas pump. They take Alaska’s oil for the cost of production, and transportation plus local, state and federal taxes. BP’s Crude costs add up to about 28 percent less than independent nonproducing refiners pay. The life of BP’s cash cow is extended by trickling Prudhoe’s production and Parnell’s tax cuts won’t change BP’s incentives.

Lease holders are legally obligated to produce on our time table not theirs. When Sarah Palin told Exxon to produce their Point Thompson lease or get out, Exxon got busy. Clearly our previous lower tax didn’t incentivize Exxon to produce and clearly our new much higher tax didn’t stop them. BP will produce on our timetable when BP hears the same clear message.

Doubt that BP would shut in production to blackmail Alaska for a lower tax rate? Consider this: On September 21, 1999, the Anchorage Daily News reported BP’s promise to increase Kuparuk’s production by 150,000 barrels per day if they were successful in purchasing ARCO’s share. Arco was the largest owner and therefore operator of Kuparuk. Six weeks later, November 6, 1999, the Anchorage Daily News reported that BP was no longer willing to increase Kuparuk’s production. BP’s promise raised the question “if that’s doable, why hasn’t it already happened?” When I, and two friends filed a lawsuit to prevent BP from gaining monopolistic control of Alaska’s oil, a man describing himself as an ARCO employee told me Kuparuk’s production fueled ARCO’s West Coast refineries. Production had fallen and for seven years ARCO had proposed drilling new holes in its annual budget. BP however owned a 35 percent share of Kuparuk and by Alaska law therefore, had the right to veto ARCO’s proposed drilling. BP used its veto to disrupt ARCO’s cash flow with hopes of starving ARCO into selling out. A friend inside BP later told me it was true and offered to testify to if subpoenaed.

Oil companies are telling voters that “Alaska’s taxes are the highest in North America.” The statement is false and those saying it know it’s false. Mexico is the highest at 94 percent (Source: Mexico’s Government). According to the U.S. Department of Interior, the second highest oil tax in North America is Louisiana at 85 percent, third is U.S. Government’s 79 percent tax on production in the Gulf, and Alaska is tied with Texas at 76 percent. Click on the link below to see the actual $1.90 bid terms executed between BP and Iraq and eighteen more similar bids for the right to produce Iraq’s oil: http://media.ft.com/cms/b09af87a-2522-11df-a189-00144feab49a.swf?width=8...

We at Citizens for Ethical government believe selling our commonly owned resources substantially below their clear and definable value on the world market not only violates Alaska’s constitutional prohibition of squandering a state owned resource, it also violates well established fiduciary responsibilities, prudent investor rules, and public trust doctrines. If Parnell’s proposal becomes law, it needs to be litigated, and hard questions need to be ask under oath.

Ray Metcalfe is a former legislator, participant in the VECO investigation, and chairman of Citizens for Ethical Government.

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akal
252
Points
akal 03/06/13 - 01:03 pm
5
1
honesty

thank God there are still some honest people trying to help Alaskans ! Ray has done more for Alaska than almost any person I can think of, his plain spoken words show the oil companies for what they are. I wish he was still in the legislature.

KenaiKardinal88
472
Points
KenaiKardinal88 03/06/13 - 03:44 pm
2
4
Metcalfe is off his rocker - again

Only the wing nuts in society take this joker seriously.

If Metcalfe had a petroleum engineering degree, he would still be crazy - but that didn't happen did it?

WinchesterM1
219
Points
WinchesterM1 03/06/13 - 07:58 pm
2
1
Thanks Ray. ALL the people of

Thanks Ray. ALL the people of Alaska owe you a debt of gratitude, among very few others, who CONTINUALLY warned the alarm, when the corporate extortion started to get wildly beyond the control of the representatives elected by the people assembled, that`s us.
Do you think that this effort to use the state`s hard-won ACES tax system "again" (it`s ALWAYS too high isn`t it?) as an excuse to extort more tax concessions, was the only effort they will ever make to extort as much "bottom line" as they can? with all their fancy numbers and graphs?? regardless of credibility of facts as presented? I don`t. Garbage in, garbage out.

That`s what this governor`s SB21 giveaway is...and I predict if the extortion is successful, it will cost us at least two billion a year average over the next ten years.
We`ll be flat broke again chasing a tax increase!!
What is going on today is ELF version 2.0.0. This old Alaskan thanks you Ray. But I bet some of these folks wish you would crawl off into some hole instead of exercising your rights to free speech communicating to Alaskans, while these birds take their oil money...http://www.juneauempire.com/stories/102807/let_20071028011.shtml and if that hoists` your petard here`s a bit more detail..http://www.adn.com/2012/05/30/2485737/oil-lobby-spent-1m-plus-to-influence.html
Leave ACES alone until there is NEW production above the 3.5% decline that has been recognized as sustainable, and you show us how your going to get the Governor`s million barrels a day into TAPS first.. Then we`ll talk about your reduction.
That`s the way I see it, old goat that I am. But I am as sure of my stand as I have to be, based on the facts that are being presented. Facts are what we need before making a decision costing Alaska billions in fiscal income needed to build the infrastructure our state founders expected us to build with our resource value. How can we get OUR OWN FACTS with an audit on ACES that is criminally overdue?
They didn`t instruct us to give it (our fiscal sovereignty) away to multinational vertically-integrated energy corporations for nothing, like we did all those years under ELF..and at other times in our state history.
These are World" corporations who can afford to find THE BEST mouth pieces to state their cases to captive politicians in Juneau, and dance around answers they don`t want to give, as Senator Hoffman discovered recently in a Senate Finance meeting. Forthcoming??? BALONEY!) And tell your Fairbanks friends to let`s get that "Red Ball Express" rolling...and show the world what a "gasline" on wheels looks like. Thanks Clarion for the public forum.

Alaskalad
55
Points
Alaskalad 03/07/13 - 04:03 am
4
1
Crazy?

KK Can't you read? Maybe you could tell us what in Mr Metcalfe's piece you dispute? Take your time. Be inclusive. Name calling doesn't count for points.

JOAT
490
Points
JOAT 03/07/13 - 08:59 am
2
3
Lies

What a completely false article. The facts are... there are 5 private tanker companies that transport oil from Valdez to the West Coast (Washington & California), Cook Inlet, and Hawaii. Only 1 of them is associated with BP. None of the oil goes overseas. None of the tankers come back to Valdez with oil on board (unless you consider the residue in the ballast water... that is sea water put into some of the oil tanks to weigh the boat down enough that it rides in the water correctly). And at the Valdez terminal, nearly a quarter of the tanks are completely empty and the remaining vary from about 25% to 75% capacity. They never allow the tanks to reach 90% full except during an emergency tanker shut down (weather hold or ice routing).

Getting all that stuff wrong in the first paragraph leaves everything else in the article of a seriously questionable slant. And to suggest that increasing taxes on oil production to 94% is a good thing? Sounds like someone is trying to destroy Alaska's economy for good.

spwright
1376
Points
spwright 03/07/13 - 12:05 pm
5
2
Trust B P ?

3/7/13 Fact :B P was just found Guilty of contributing to the DEATH of 11 EMPLOYEES & thru their own neglect caused the LARGEST OIL SPILL in American History.
Creditablity ? What Creditability ?

WHY does the State of Alaska still do business with B P ?

SPW "Airborne"

WinchesterM1
219
Points
WinchesterM1 03/07/13 - 12:58 pm
3
1
Hey JOAT...here`s proof

Hey JOAT...here`s proof tankers have been bringing oil BACK TO VALDEZ. On several occasions, and it`s an on-going occurrence. (http://www.chron.com/business/article/U-S-awash-in-oil-but-global-demand...) and this..(http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=10&cad=rja&...) and more if you need it..(http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=20&cad=rja&...)

Sam Von Pufendorf
1088
Points
Sam Von Pufendorf 03/07/13 - 08:11 pm
0
0
BP "found" guilty?

BP was not "found" guilty. They plead guilty to manslaughter without trial. Thay are currently the defendant in a civil trial in Louisianna concerning the spill and gross negligence in which they entered a plea of not guilty. There is quite a difference in being "found" guilty and "pleaing" guilty.

JOAT
490
Points
JOAT 03/07/13 - 05:19 pm
3
1
That's your proof?

Come on dude. You're citing a Texas newspaper article from a year ago as proof that BP is trying to blackmail AK? Since I was on the inside when that event happened... it had nothing to do with NS production rates. It had to do with the worldwide oil market, crude prices, and refinery capacity. BP controls none of those market factors. Somebody really needs to go back to college and take a basic economics class. BTW, that "big deal" when the tanker couldn't unload was a one-off event, not a trend. It's so rare, that everyone took notice, even the folks on the pipeline. Because tankers never arrive in Valdez with oil already on board.

I can assure you, because this morning I looked at the loading and cargo schedule for the last month, that no tankers are coming back to AK with crude on board. The entire premise of this article is false and the cited information is littered from the 1990's, which was an entirely different market and BP was an entirely different company run by an entirely different board of directors. Get out of the distant past and look at the current market. Right now, production is falling because the Federal government has locked up the oil fields and there is no new exploration and very little new drilling underway. Our 2,000,000 barrel per day pipeline is dying under a 500,000 barrel daily throughput. It wasn't designed for such flow rates and the oil companies have been dumping billions into updated designs and massive reconstruction efforts.

The fact is, 2012 was one of the biggest oil contruction project seasons in the state's history and 2013 is slated to be even bigger. While you sit there and claim that the oil profits are being sent to England (false), from what I see with my own eyes, the oil companies are turning over the profit right back into Alaskan projects, offering up hundreds of great-paying jobs to our Alaskan workforce. Then those workers are spending the money back in town (Anchorage, Fairbanks, Kenai, etc.) which is keeping folks gainfully employed in all the local retail and service businesses. Then those people are able to buy housing, food, transportation, etc. And at each tier of that "trickle down", the gov't is slicing off their piece in taxes. Lord only knows how many times the gov't taxes a dollar in oil profits over and over and over again as it works its way through the state.

The last thing we need is for the state government to get any more of our money. Let's keep that money in the private economy where it can do some good for all of us! Keep the tax rates low and force the state to live within its means.

KenaiKardinal88
472
Points
KenaiKardinal88 03/08/13 - 04:21 am
1
5
The Freak Parade

While Alaska continues to lose oil production in the face of rising prices, the ignorant ones like Metcalfe fiddle.

BP, COP, Exxon, others have done nothing wrong as they have to stay in business. Unfortunately, places like Nigeria are better investments than Alaska.

Norseman
3373
Points
Norseman 03/08/13 - 08:08 am
3
2
Unfortunately, places like

Unfortunately, places like Nigeria are better investments than Alaska

You really are duped. When was the last time you were in Nigeria? Oil companies run our state. They own our elected offcials.
They spend millions promoting warm and fuzzy TV commercials making us all think they are actually cousins of greenpeace.

They have stated for 20 years that the taxes in AK were just unbearable. Funny thing is that they have risen to become the wealthiest companies this world has ever seen.

All common sense dicates is that we get a fair return on our natural resources. Nothing but a fair return. What the problem is what is fair to us may not be the same to big oil.

Do a little math and try to find out how many millions have they spent on lobbying our government. Now who do you think the government is going to listen to?
You who email or call to whine and moan, or a nice hefty check in a savings account from an anonymous corporate donor.......

Raoulduke
3055
Points
Raoulduke 03/13/13 - 07:46 am
0
0
blackmail?

Petro politics,and political corruption go hand in hand. Alaskan's go figure.So! Whatever is stated from Juneau.The giving of the Alaskan resource will continue,and the Alaskan will lose. They run an exclusive club.

spwright
1376
Points
spwright 03/14/13 - 11:43 am
0
0
Gas Line on Wheels

3/14/13 Question ? How many Semi-Trucks driving the North Slope Haul Road will it require to move a Billion Cubic Feet of Natural Gas ?
What happens when the Dalton Highway is closed cuz of Weather Delays & those Semi-Trucks have no access to the highway ?
Why build a Natural Gas Refinery on the North Slope when we already have one in Nikiski ?

I do give Our Legistlators credit for attempting to find some sort of solution to the Interior Alaska Energy Crisis.
At least now they are Trying instead of just Talking about it.

SPW

Raoulduke
3055
Points
Raoulduke 03/14/13 - 11:58 am
0
0
moving

Why not build a rail line next to the road?Then more than just gas could be hauled.Sure! It is going to have some upfront cost,but I would bet.The rail line would cost much less.Than the tax breaks that are now being given to one of the wealthiest corporations in the world.I was just thinking outside the box.

kurt hickel
5
Points
kurt hickel 03/17/13 - 09:32 pm
0
0
lost oil revenue

Gov Parnell says we are losing jobs to North Dakota due to our oil taxes , I call BULL , the reason oil companys are concentrating on N.D. is because they have 3 years to "prove up" on the lease or they lose it , simple as that !
,, the state of alaska gave forever lease's ??? who's brain child was this ?

Our legislature's need to pass a bill stating that any lease's held for more than 5 years with no production go back to the state for renewed leasing , I am not talking "field" lease's either , I'm talking well production areas, down to the last well needed to produce an area.

I don't want to hear any bull about "logistic's " this is not 1950 .,, I say produce it or lose it !

Raoulduke
3055
Points
Raoulduke 03/18/13 - 04:27 am
0
0
losing

The Alaskan is the only loser,excluding the Legislators.They are getting their portion.The Alaskan's have only themselves to blame.The Alaskan keeps electing the same bought ,and paid for by the oil companies type politicians.So! Quit your whining.You put them there. Reap what you have sown for the last 40 years.

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