Groups trying to stop the repeal of a massive tax cut for the oil industry have outspent their opponents 43-to-1, dropping a staggering $3.6 million in four months, with most of the contributions coming from some of the world’s richest oil companies.
A barrage of ads has already appeared on radio and TV. Millions more will likely be spent in the months before a referendum on the new tax system appears before voters in the Aug. 19 primary election, said an official with one of the groups.
Meanwhile, those who oppose the tax cut have spent just $83,000, the latest reports show. Most of that spending was done last year as supporters of “Vote Yes -- Repeal the Giveaway” traveled the state gathering signatures to get the item on the ballot.
Companies that will benefit most from the oil-production tax cut, ConocoPhillips, BP and Exxon Mobil, have each contributed $1.3 million to “Vote No On 1,” the largest of two ballot groups fighting to retain the cut.
Tax cut opponents have said the spending is nothing compared to the billions of dollars the oil companies stand to make from the new law.
Introduced by Gov. Sean Parnell as Senate Bill 21, the tax cut replaced the old production tax that increased as oil prices rose and brought the state billions of dollars in savings. During the legislative debate last spring, state officials said the cut would actually provide “downside protection,” meaning that it would bring the state more tax revenue if oil prices dropped to about $80 a barrel and lower.
With oil prices hovering around $108 last spring, state officials in the administration estimated that if the tax cut passed, the state would lose about $4.3 billion for the next six years.
But just months after that estimate was released, the administration, citing factors that included lower-than-expected oil prices and production, plugged new figures into the formula. State officials now say the tax cut will bring in about the same amount of money as the former tax, at least through 2015.
Vic Fischer, chair of Vote Yes, said he’s skeptical of the state’s new argument. The massive amounts of money the oil companies are spending shows the tax cut is far more valuable to them -- and far more hurtful to the state -- than the administration is now trying to suggest, he said.
“Considering how much Outside money is coming into this in favor of keeping Senate Bill 21, it’s simply an indication of what a fabulous deal they’re getting from Senate Bill 21,” said Fischer.
Even if Senate Bill 21 does happen to bring in the same amount of tax revenue in the short-term, the oil companies know they’ll be billions of dollars ahead in the long-term, he said. “It really shows there’s much to Senate Bill 21 that the public cannot see,” Fischer said.
Vote Yes has raised far less than the opposing ballot groups -- $159,000, according to its year-end report filed on Feb. 1. The giving often includes small donations from individuals of $10, $25 and $50. The two major donors during the recent reporting period -- giving $25,000 each -- were BJ Gottstein, former part-owner of the Carrs grocery store chain, and Robin Brena, an attorney who has faced off against the oil giants in court cases.
In contrast, the Vote No group has raised $4.6 million, almost all of it from corporations rather than individuals. Besides the $3.9 million given by the state’s three major oil producers, other big donors include:
• Repsol, the Spanish oil company, giving $264,000.
• Chevron, which owns small shares in Alaska’s largest fields, giving $150,000.
• Pioneer Natural Resources, which announced the sale of its Oooguruk field last year, giving $97,000.
• Royal Dutch Shell, holding state leases in the Beaufort Sea as well as federal leases in the U.S. Arctic Ocean, giving $7,700.
• Other donors of $7,700 include Statoil, which has federal leases in the U.S. Arctic Ocean, and Cook Inlet explorers Apache and Hilcorp.
Leslie Hajdukovich, a co-chair of Vote No On 1, said the large amount of spending shows how important the issue is to Alaska. The tax cut will lead to more production, she believes, which will help future generations because the state’s economy is heavily tied to the oil industry.
“And the other piece of this is the gasline,” she said, touching on the argument that a healthy oil and gas industry is needed to build the costly pipeline and facilities that will allow the state to profit from its huge North Slope natural gas reserves.
Most of the money raised by “Vote No on 1” -- more than $3 million -- has gone to Porcaro Communications, owned by AM radio talk show host Michael Porcaro, who hosts the Mike Porcaro Show on Anchorage station 650 KENI.
The money was spent on things like radio and TV ad spots running on a variety of media companies, as well as printing, research and management.
Willis Lyford, senior vice president at Porcaro Communications, is a deputy treasurer and spokesman for Vote No on 1. The ballot group’s campaign offices are located at Porcaro Communications in downtown Anchorage, he said.
Mike Porcaro has a policy to disclose his business interests when he discusses the tax cut on the radio, said Lyford.
Lyford said the Vote No group is spending heavily now in order to overcome an “information deficit” that stems in part from misinformation propagated by tax-cut opponents. “Vote No on 1” is running fact-based ads, he said, citing information from credible sources, such as government reports.
“There’s a lot of confusion so that explains our desire to be out early, clarify the issue and make sure people understand the issue and the consequence of voting ‘Yes,’” he said.
Also contributing to the large costs are the fact that it’s a busy season for political ads, with a number of issues on the ballot in August and the U.S. Senate race in Alaska already one of the most contested in the nation, he said. As a result, TV and radio stations are making a premium by charging issue-related groups three to five times as much as they charge traditional advertisers.
“This is a serious profit opportunity for media outlets, and I can say with confidence that they are taking advantage of it,” said Lyford.
The “Vote No on 1” group has been running radio and TV ads regularly for the last month, including one that uses a locker room pep talk as a metaphor, with a youth hockey coach telling the team that strategic changes will win the game, while a narrator states that “oil tax reform” is creating new investment and jobs and changing the game in Alaska.
As far as advertising, the group will likely go quiet for the next several weeks before launching another ad campaign, Lyford said. It’s fair to say the group will spend millions more before the vote is held, he said.
A second group that also supports the tax cut, “Keep Alaska Competitive -- Vote No On 1,” formed in November.
That group has raised more than $250,000 and has already spent about $90,000. It has plans to spend another $211,000, according to its disclosure reports. The group is focusing on social media advertising, and using e-blasts and direct visits with businesses to get its message out, said Jeanine St. John, a deputy treasurer.
Most of its money has been spent with MSI Communications, a marketing and advertising firm in Anchorage that is providing communication and helping manage the outreach effort, according to reports.
The funding for that group is not dominated by the oil industry, but many of the contributions have come from companies that do business with the oil industry. Major donors include Lynden-owned companies providing transport services, which have given around $50,000. Other big donations are $40,000 from Saltchuk Resources, a Seattle-based transport company, $30,000 from Udelhoven Oilfield Services, $27,000 from Trident Seafoods Corp., and $25,000 from Alaska Frontier Constructors.
As for the “Vote Yes” group, Fischer said it will continue to get its message out primarily by using social media, writing letters and appearing in news reports. The group was effective during the signature period that ended last summer, with state election officials confirming more than 45,000 signatures on the referendum, far more than the 30,169 needed.
“We will obviously never be able to match this multimillion dollar campaign in terms of advertising, so we’ll communicate with Alaskans in other ways,” Fischer said.
Contact Alex Demarban at alex(at)alaskadispatch.com