Saturday, August 02, 2014

"Alaskans should be partners with oil companies, not adversaries" Sounds Like "The lion shall lie down with the lamb"

The first quote is the title of a Mike Dingman editorial in the print version of the Alaska Dispatch News.  Online, the title is "Dingman: Alaskans should not repeal oil tax cuts."  

But near the end, he does write, "I would contend that a partnership much better serves our goal at developing our natural resources for the greatest benefit of all Alaskans."

The market, we are told, over and over again, works because of competition.  When business folks start talking about partnership with government, I get worried.  They rail against government, until they think they can get something from government.

The oil companies' main purpose is NOT to drill for oil, but to maximize profit for their shareholders. It's certainly not to help the people of Alaska.  There's nothing in their mission statements about that.   They're playing a zero-sum game:  the more money the state keeps the less the oil companies get.  The more the oil companies make, the less the state makes.

But now they're talking variable sum:  lower taxes will result in greater production and greater revenue for Alaskans. But like any good salesman or poker player, they're using all the terms that they think will persuade voters, but they're not offering any proof or promises to back up their words.  It's just platitudes. It's theory, not fact.   

Two Alaska Senators challenged the governor to agree to repeal SB 21 if it doesn't result in one barrel or one dollar more than ACES (the previous oil tax) would have brought in by 2018.  They were derided by the governor's friends as gimmicking.  But, if the governor really believed in SB 21's superiority (in terms of long term state revenues) to ACES, he should have readily agreed.  The truth seems to be that the governor isn't really sure.  It's all a poker bluff. 

There is a natural conflict between the state and the oil companies.  Actually there are more than one.

First, the State's job is to maximize Alaska's natural resources for the benefit of the people of Alaska.  As owners of the oil, its the governor and legislature's job to get top dollar for Alaskan oil.  The oil companies' goal is to maximize their shareholders' profits.  Zero-sum game.

Second, the state's job is to monitor the oil companies to make sure they comply with all state laws and regulations and the companies, in their attempts to maximize shareholder profit, are constantly tempted to find ways to cut costs - leading to things like oil spills because they were cutting on maintenance or moving oil rigs into bad weather to avoid taxes

In both the above cases, the companies denied what they later pleaded guilty to.  We really can't take them at their word, they've proved that over and over again.  Remember how Exxon dragged out their payments over the Exxon Valdez oil spill for over a quarter century?

The government is already at a disadvantage when negotiating with the oil companies - most state information is available to the public, but the oil companies aren't required to disclose their information.  (Yes, lots must be disclosed to regulators, but they have far more hidden at negotiations than the state does.)

The state and the oil companies are adversaries - a role the founding fathers saw as the way to keep checks and balances by giving different powers to the executive, legislative, and judicial branches.  

There are times when the state and private organizations can work in partnership, but Alaska's ownership over its oil puts it in an adversarial relationship with the oil companies.  We aren't partners.  We're competitors who can sometimes cooperate.  But my confidence in Alaska's ability to bargain aggressively for the people of Alaska is greatly reduced when the head of 'our team' was an attorney and lobbyist for one of the oil companies before becoming governor.  

Saying we should be partners is a noble goal, like the lion lying down with the lamb.  (Or with the wolf as this post says was the original wording.)   I'll let all those opposing Proposition 1 let their lambs sleep with lions and watch what happens, before committing my lamb, or my state, to the lions.  

I'm all for variable sum games.  Looking at the world with a zero-sum lens is short sighted.  But the other side has to really be serious about variable-sum and there's nothing about oil companies that suggests that's their mode.  They may well believe their own rhetoric, but their failure to make any concrete commitments in exchange for SB 21 says lots more than their words. 

1 comment:

  1. Steve, noting your caution, I add this: Back in the 1990s whilst in London, I was in the underground when I came across a very out-of-place image on a large billboard -- it was a wintry scene of North slope Alaska, an oil rig, flaring gas...

    On that photo was a BP logo with large, bold words to this effect: "Keeping the home fires burning."

    I stood there, mulling Alaska's struggle for self-determination and people I knew from the fight for statehood and realised: We're still a colony.

    The oil may be yours, Alaskans, yet this is how the world sees it.

    [Writer's note: I had to make a correction after posting and given that one can't edit a post, I had to delete. Oh well, to another version!]


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