Deal with Big Oil from position of strength

Jack Roderick

When I re-drafted for the state Alaska's oil and gas leasing law in 1978, it never occurred to me that after agreeing to produce oil from an Alaska lease as long as it was "in paying quantities," an oil company could later claim it could no longer make a profit from the lease in Alaska.

Alaska's "Big Three" executives are now saying they can make more money somewhere else, so won't invest dollars to produce more known oil on the Slope unless the state lowers its taxes. This despite world crude prices hovering around $120 a barrel.

I'm sorry now that I didn't look far enough ahead to change some of my re-draft language.

We all know that the state is now dependent for most of its funds on oil. For more than 40 years we should have planned for this dependency. Declining production in the TAPS pipeline is just the poster child for the problem.

The oil executives, few of whom were here when the Prudhoe Bay leases were signed, are now doing what they were hired to do: trying to increase their profits. Future executives, likewise, will continue to pressure the state for more concessions, leading to more profits.

So, sure, make accommodation with the multinational oil companies. Try to reach a "fair share" agreement. And, certainly, make it for as long as possible. But -- do it from a position of strength.

When Jay Hammond was governor, he was asked how much he would tax the oil companies. "For every cent we could possibly get. After all, just as it is the obligation of oil company CEOs to maximize benefits for their shareholders, so it is the obligation of the state's CEO to do the same for his."

Does our present governor, the state's CEO, see his role the same as Hammond's? Having once worked for a "Big Three" company, his pro-oil company point of view is obvious. His opponents call it a "giveaway" attitude.

Gov. Frank Murkowski acted in much the same way. Those secret meetings with multinational oil company executives, I believe, were among the reasons he became so politically unpopular with Alaskans.

I also think the recent photograph in the Anchorage Daily News of our governor standing alongside the "Big Three" CEOs conveyed the same sort of message to his constituents. They want to know who's representing them? Who has Alaska's best interest at heart?

Don't blame the service companies, many of whom support lowering oil taxes. They can't survive unless the companies give them contracts. (I used to own several service companies, so I know what that dependent feeling feels like.)

And don't blame the corporate executives. They're doing what they're being paid to do.

If you feel you need to blame someone, blame yourselves, and the Alaska voters who preceded you. For decades -- certainly since the Permanent Fund dividend -- we've allowed the world's most powerful companies, operating in the world's most powerful industry, to control our most important natural resource, oil.

That has to change. I commend those in Juneau who are showing the leadership Alaska needs to deal with the oil companies from a position of strength. I hope you'll support them.

Jack Roderick is the author of "Crude Dreams: A Personal History of Oil and Politics in Alaska," a businessman, lawyer and former mayor of the Greater Anchorage Area Borough (1972-75).