Thursday, August 10, 2017

KTVA (and others) still don't get it about cashable oil credits ...

In a story Tuesday KTVA tried -- and failed yet again -- to get the cashable oil credits story right. See, "Alaska ended cash credits to oil companies, but still owes nearly $1billion,"
In an apparent effort at a deeper dive, KTVA bought hook, line and sinker the story line being peddled by some oil companies that the state is not performing on obligations related to the program.  

Here is KTVA's take:
"Alaska advertised itself to companies in the Lower 48 with brochures carrying a promising message: 
'For the entire lifecycle of your project, the State of Alaska is there for you. We do not just talk big, we follow through big — with cash!,” a 2014 brochure published by the Alaska Department of Revenue reads. ... 
"For years, Alaska did follow through on its promise — with cash. But suddenly, everything changed. Low prices meant less money for state coffers, and ... the state hasn’t paid them off since. 
"Companies began halting projects in Alaska — saying they’d been banking on the state’s promise.
'There’s now a phenomena out there spoken about by companies and investors called the ‘Alaska risk factor,’ and it refers specifically to the unpredictability of the State of Alaska, particularly in paying off the credits that we agreed to pay, said Giessel."
As was clear in the materials circulated at the time what the state agreed to pay was defined by statute, not what some are now backreading into brochures.  And this is what the applicable statute, AS 43.55.028, at the time, provides now, and indeed has provided from the beginning of the program :

(a) The oil and gas tax credit fund is established as a separate fund of the state. The purpose of the fund is to purchase transferable tax credit certificates issued under AS 43.55.023 and production tax credit certificates issued under AS 43.55.025 and to pay refunds and payments claimed under AS 43.20.046, 43.20.047, or 43.20.053. 
(b) The oil and gas tax credit fund consists of: 
(1) money appropriated to the fund, including any appropriation of the percentage provided under (c) of this section of all revenue from taxes levied by AS 43.55.011 that is not required to be deposited in the constitutional budget reserve fund established in art. IX, sec. 17(a), Constitution of the State of Alaska; and 
(2) earnings on the fund. 
(c) The applicable percentage for a fiscal year under (b)(1) of this section is determined with reference to the average price or value forecast by the department for Alaska North Slope oil sold or otherwise disposed of on the United States West Coast during the fiscal year for which the appropriation of revenue from taxes levied by AS 43.55.011 is made. If that forecast is 
(1) $60 a barrel or higher, the applicable percentage is 10 percent; 
(2) less than $60 a barrel, the applicable percentage is 15 percent.
The only obligation of the state is to appropriate annually the percentage of the production taxes received by the state ("all revenue from taxes levied by AS 43.55.011") provided in subsection (c).  And the state has done that every damned year since the start of the program.

While the state could appropriate more money to the fund, as it did in some prior years, it is not now and never has been obligated to do so.  No one representing the state could promise or, contrary to Sen. Giessel's claim, agree to pay more because the statutes -- which were referenced in the materials distributed to the potential participants and clear on their face -- didn't authorize anything more.

What Sen. Giessel and others are urging now is for Alaska to go beyond, indeed far beyond, the obligations made in the statute, not live up to them.  They want the state now to pay annually to the oil companies additional monies that the state never promised, agreed to pay or have even the remotest statutory or legal obligation to pay.

The reasoning behind the statute was clear.  In times of high revenues the state would pay more into the fund and companies would recoup their claims (by cashing in the credits) at a fairly fast rate.

In times of lower revenues, however, the state was "obligated," "promised," and "agreed to pay," only lower amounts into the fund and the companies would recoup their claims at a slower rate.

Now that oil prices have dropped and the lower revenue -- and thus, slower recoupment rate -- apply, the companies are trying to change the rules through a PR effort.  It is bad enough that some legislators, trade groups and industry mouthpieces are going along with that.

It is just plain disappointing that one of the state's news organizations continues to fall for the "alternative facts" hook, line and sinker.

Come on, KTVA, you are better than that.