Governor needs to address van Meurs' oil tax criticisms

Gov. Sean Parnell and supporters of his plan to revise the state’s oil tax system to spur production have a problem they need to aggressively combat.

The problem’s name is Pedro van Meurs. The problem isn’t the man, of course; rather, it’s a report his company produced regarding oil and gas tax systems around the world.

The report isn’t kind to Alaska’s present oil tax system.

Nor is it kind to Gov. Parnell’s proposed changes.

The report, to which the Daily News-Miner was given limited access by Mr. van Meurs’ company, bluntly states that Alaska’s current oil tax system isn’t working. The report says the system put in place under then-Gov. Sarah Palin, known as Alaska’s Clear and Equitable Share, needs to be replaced.

ACES, approved in 2007, doesn’t do enough to encourage production of heavy oil, the remaining large — yet difficult to produce — source of oil on the North Slope, the report says. The law is inadequate in dealing with natural gas.

It also notes in its many pages that Alaska under ACES has toughened its fiscal regime in the past 15 years. But it also notes the state has done so at a time when other governments, such as in Canada and Greenland, have loosened their fiscal systems to entice activity by the oil industry. Alaska has become a less-favorable place to do business, it seems.

Those are precisely the problems that Gov. Parnell is trying to fix with his proposals, contained in House Bill 110. The House passed the bill earlier this year, but it stalled in the Senate amid strong opposition from key senators. The Legislature reconvenes in January, and the governor wants to see his bill approved.

The van Meurs report is no friend of the governor’s bill, however.

It is as blunt in rejecting the Gov. Parnell’s plan as it is in saying the current system is broken. The report finds several areas of fault with the governor’s plan and says he cannot meet his goal of getting more oil in the trans-Alaska oil pipeline without doing something to get the heavy oil out of the ground. It says neither his proposal nor another bill, House Bill 17, will work in their present forms.

Mr. van Meurs, with a lengthy history in the oil industry, is no stranger to Alaska. He was a prominent figure in the oil tax debate that occurred during the term of Gov. Frank Murkowski.

The report by Mr. van Meurs’ company raises questions that even supporters of Gov. Parnell’s efforts should want answered.

This is a high-stakes time for Alaska in an increasingly competitive global oil market.

Gov. Parnell’s course may indeed by the correct one for the state. If so, his proposal should be able to withstand the scrutiny that the van Meurs report invites.

The governor and his team must confront the van Meurs report head on if they want to sustain and build support for their approach.

10/20/2011 - 11:45am