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Overseas, Parnell stretches the truth about European oil production

Pat Forgey
Gov. Sean Parnell is visiting Europe's top oil-producing countries to tout the oil tax cut passed in April, but his lobbying team's claims about production trends in Norway and the United Kingdom could have been more accurate. Loren Holmes photo

Gov. Sean Parnell is visiting top European oil producers Norway and the United Kingdom to see what Alaska's new oil tax cuts may mean for the North Slope, but critics are saying a better time for the trip might have been before he proposed reducing taxes by billions of dollars over the next several years.

And the Parnell lobbying team's claims about whether tax cuts elsewhere had spurred new production might have been more accurate.

“The UK is seeing the real results of tax reform – billions of dollars in new investment and job opportunities,” Parnell said in a press release announcing his trip. “Like the UK, we have positioned Alaska for an oil production comeback by making our state more competitive," he said.

Parnell was careful to refer to new "investment," and not new "production," but his team sold Senate Bill 21, his Alaska tax cut proposal, based on the new production it’s designed to bring.

Parnell's top two lobbyists for Senate Bill 21 were Department of Natural Resources Commissioner Dan Sullivan and Department of Revenue Commissioner Brian Butcher.

"Certainly our throughput oil production is declining, but what have other basins done that were declining? Has anyone else turned their basins around?" Sullivan said in a rhetorical question while presenting Senate Bill 21.

"The answer is pretty much everybody at these high sustained prices in the U.S. and other countries is turning their throughput declines around, with the very depressing exception of the great state of Alaska," Sullivan said.

"We're the only oil-producing jurisdiction that's still in decline," Butcher said.

That's contradicted in the country Parnell just visited, where he met with BP North Sea officials, as well as those from BP Norway and Statoil, the Norwegian state oil company that's now interested in Alaska.

Both the United Kingdom's North Sea fields and Norway have actually seen declines.

Oil & Gas UK, the industry group for the offshore oil and gas industry in the United Kingdom, actually saw 2012 production decline by 14 percent from 2011 -- and 30 percent from 2010.

The industry group said another decline is expected in the current year, but it hopes that tax cuts will result in increased production in the future.

Shale oil and new technologies have resulted in increased U.S. production, but many basins around the world, including most where BP is invested, are in decline as the resource runs out.

The Alaska Democratic Party Wednesday said Parnell missed the point on both Norway and UK oil tax systems.

"Norway and Great Britain illustrate why the oil giveaway is bad for Alaska," said Mike Wenstrup, state party chair. "Parnell ignored the Norway model of saving oil revenue and the British model of focusing incentives on new oil production."

Parnell has proposed spending the state's savings to cut oil taxes, and said he expects the tax cuts to result in an undetermined amount of new revenue to the state as production increases.

Sullivan said they'd already seen a similar effort work in the North Sea, where BP sold its Forties field to Apache Corporation, which is aggressively developing it.

"The North Sea basins and Apache Corporation's Forties field acquisitions have turned declines around as a result of tax reform," Sullivan said.

Rep. Beth Kerttula, D-Juneau, said that Apache's increases may have more to do with the company than with the tax reform.

"It's one of the smaller, scrappy companies which will develop resources the BPs and Exxons are no longer interested in, and it’s the kind of company we could use more of in Alaska," she said.

Some of those companies have been attracted to Alaska in recent years, which was a strategy in the current Alaska’s' Clear and Equitable Share (ACES) oil tax regime that Kerttula supported.

Apache is already active in Alaska, but in Cook Inlet.

BP's oil production in both the UK and Norway has decreased dramatically in recent years, but the numbers also include some additional sales of assets in both countries as the company has looks for more attractive investments elsewhere.

Sullivan, however, told legislators that both basins had reversed production declines.

"Literally everybody else is turning around that decline," he said.

On Tuesday, Parnell focused on new investment, not production, and he said Senate Bill 21 was already working.

"Alaska has already seen encouraging steps toward more production and new investment with recent announcements from Conoco and Repsol,” he said.

Those companies both praised Senate Bill 21 publicly, and claimed things they were already doing or studying were because of the bill.

Parnell's European trip also resulted in criticism of that he's playing politics.

Wenstrup calling Parnell’s European trip a "junket," and activist Andree McLeod demanded the governor’s office detail Parnell’s travel expenses.

“Is this unnecessary trip yet another attempt by Parnell to burnish his missing foreign relations experience on the state’s dime and time in advance of some future election?”

Parnell, who had regularly traveled representing Alaska since becoming governor, including overseas, has announced he will announce his future election plans Friday.

Contact Pat Forgey at pat(at)alaskadispatch.com