Influencing Policy By Threatening Nonprofits
10 April 2006This letter was sent to United Way of Anchorage by Senator Hollis French and Representative Les Gara. I think it speaks for itself…
April 10, 2006
United Way of Anchorage
701 W. 8th Ave.
Anchorage, AK 99501Dear XXXXX:
We recently learned that representatives from your organization and other Anchorage nonprofits were invited to attend a meeting hosted by ConocoPhillips to hear their view of the bipartisan tax reform efforts underway in Juneau. While we very much appreciate the work of ConocoPhillips and the other energy companies in this state, we question some of the information you may have been provided at the meeting, and believe it may have caused some undue concern by your and other non-profit agencies on tight budgets.
A recent report from the State Department of Revenue shows that under almost every possible oil tax scenario – including current law, the governor’s 20% tax proposal, and under tax proposals even as high as 30% — profits by Alaska’s oil companies would remain staggeringly high next year. We believe that ConocoPhillips should have been mentioned this to your agency during their address to you last week.
The Department of Revenue report shows that any North Slope producer, if willing, would still be able to donate as much or more to the non-profit community than they do currently.
Here are a few facts we hope you’ll keep in mind as this important debate goes forward:
- As stated in Conoco’s own profit statements, the company earned more profit in Alaska in 2005 than in any other region in the world. This has been true for several years.
- Conoco’s profit margins, under both low and high oil prices, have ranged from a hefty 29% in 2002 to over 40% in 2003, 2004 and 2005. Profit margins for most of the biggest companies in the world sit below 15%.
- According to the Department of Revenue’s analysis, even if tax rates between 20% and 30% were adopted, average Alaska profit margins for North Slope producers would remain, at current prices, above 35%, and North Slope company profits under these tax reform proposals are forecasted to range between $5.75 and $6.4 billion next year. And if prices fell to $20/barrel, the proposals being discussed in Juneau would result in even higher profits for North Slope producers than provided under current law.
- Even under the tax reform proposals being discussed, Alaska would still tax below the world average. According to legislative consultant Daniel Johnston, world average “government take†is between 67% and 70%, but the government take in Alaska would still sit, at forecasted future oil prices, below 65%, and under some proposals below 60%.
Please take a moment and consider the chart that we have provided. The information comes from the state’s Department of Revenue, and shows the oil industry’s profitability at various prices and tax rates. (DOR Chart attached)*
The oil tax reform discussion is a serious one. But without a fuller discussion of the information on this topic, we believe non-profit advocates, and other Alaskans, might be misled by presentations like the one ConocoPhillips provided last week.
We hope you might distribute this information to your member organizations, and others in the non-profit community who may be alarmed by Conoco’s statements.
Best Regards,
Senator Hollis French - Representative Les Gara
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