Below is a letter to all legislators from a world renowned oil consultant who our legislature employed to advise them on oil tax issues. He makes his living holding seminars around the world teaching government officials how to negotiate with oil companies. Attached is a chapter from his course materials. Alaska's future ability to build roads, pay teachers, and patch potholes depends on how well Alaskans understand the attached.
When he writes about "Government Take," he is referring to the sharing of either the oil produced or the profits derived after the successful bidder has recovered the costs of drilling, production, and shipping.
When he references 85%, 90%, and 95%, he is referring to what the winning bidder offered to pay to the host country if they were awarded the license to develop the block after the winning bidder had recovered costs. (Block meaning leased tract.) (License meaning successful high bidder.)
With Veco's recent in court admission to having secretly provided unreported under the table political contributions to dozens of their favored candidates, Alaskans have reasonable cause to suspect that those still seated legislators who cling to Veco's positions have very likely been willing recipients of Veco's bribes. If we don't get our fair share, I believe a mass recall of several corrupt legislators may be in order.
See Consultant Daniel Johnston's letter below:
This unsolicited response is partially inspired by the recent editorial from
Representative Jay Ramras. Some of you may recall that (prior to his recent
editorial) Jay had questioned my credentials because I was from New
Hampshire. Ben Stevens also used to beat this drum. It always surprised me
that that logic managed to gain traction and was used so often. Jay did
partially explain his statement to me when I was in Juneau last month. Thank
you Jay, but I am still scratching my head over that one.
For those of you who had to suffer through my testimony the past two years
you will recall numerous references to risky places like Libya, Kazakhstan,
Algeria and Russia where the government share of profits ("take") was in the
high eighties i.e. around 85+%.
So now Alaska is considering a change to the petroleum profits tax which
will add another 1% or so to Government take. Yawn. As I mentioned the last
time I testified, by the time I arrived on the scene the debate had already
zeroed-in on a tax rate of from 20 to 25%. That spread equated to a spread
in "take" of only about 2 percentage points.
Now, Libya is considering a change of its own. The first of the big license
rounds in Libya (which I have often referred to as "feeding frenzies") was
only just recently -- 2005. While the average government take of the various
licenses awarded in 2005 was only around 85% or so some of the high-interest
blocks went for a nearly 95% take. These blocks had up to 15 bids per
block!!! Now even for those licenses the take is going to change according
to the press release below.
I have included a copy of the article I published last year about the
licensing activity in Libya. Sounds like my article will soon be obsolete.
The rhetoric about greedy Alaskan's is a joke. It is also a joke to think of
Alaska as a basked case of instability. Give me a break.
AND, I caught some grief for mentioning "the cloud" of corruption in Alaska
when I testified and I had to listen to an endless trail of statistics
regarding voting records of Kott, Kohring and others. And when did Pedro
have time to research the voting records of these guys? Who spoon-fed Pedro
As far as destroying the investment climate in Alaska? Sorry, the modest
change recommended by the new Governor will hardly even register. Relax. The
same rhetoric that is being used to bludgeon Alaskans on this issue is
standard fare and I don't blame the oil companies for trying. That is their
But I have seen and heard it before. The modest changes proposed do not even
come close. And in fact I am still depressed that what little bit of
progressivity you had is watered down with the Governor's proposal. Damn.
I am in Vancouver at the moment on my way to Turkmenistan where e-mail and
other communications are not exactly user-friendly. That is why I felt the
need to say something-now. I am awfully proud of you guys. Hang in there. I
read about 5 Alaska newspapers every day and follow as best I can every
ounce of news. But for the next week I will likely be a bit out-of-touch.
Good luck and may God bless you all.
PETROLEUM INTELLIGENCE WEEKLY
IOCs Come to Terms With Libya’s New Deal
Monday, November 5, 2007
Libya’s state National Oil Corp. (NOC) is renegotiating contracts with all
of the country’s current oil and gas producers with the aim of tightening
fiscal terms to increase the government’s take in line with higher prices.
The goal is to reshape all concession agreements and earlier Epsa-2 and
Epsa-3 contracts to the Epsa-4 model used in Libya’s last four bid rounds.
Under the new deals, NOC will seek a bigger share of production.
Phone: (603) 525-9330
FAX: (603) 525-4218
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Hancock, New Hampshire U.S.A. 03449