Democracy or Corporate State?
23 May 2006One of my colleagues is a thoughtful and mild-mannered policy analyst. I don’t hear from him very often, but clearly he is becoming increasingly alarmed by some of the issues surrounding the Governor’s dealings with the multinational energy companies. With permission, I am reproducing here part of a powerfully stated and deeply disturbing email message I recently received from him:
Here is the link to the powerpoint that the Attorney General presented to the Legislature. This is the real crux of the contract–a 45-year sell out of the legislature to not change taxes on oil or gas. The Attorney General says that the legislature can contract away its taxing authority that is specified in Article IX of the Constitution. And he says at the end of his talk that the voter initiative process (Article XI) can also be eliminated as well by this contract. He invokes the framers at the constitutional convention.
The Legislature’s own lawyers (Legislative Legal and Research Service) have concluded that the Legislature cannot contract away their taxing authority for 45 years. I am still searching for these documents, but the Daily News reported on Sunday that the legislature’s lawyers said they could not contract away taxing authority. So they are now debating whether to include “reopener clauses” in the gas pipeline contract. This would give them the oppportunity to look at the contract again if there are substantial changes in economics or technology. A reopener clause makes a lot of sense. If the state is going to be business partners in a pipeline, we should be able to renegotiate terms if there are substantial changes. The contract could specify thresholds when the reopener clause kicks in. For example, if the price of gas increases 25% or 50%, then we get to renegotiate the terms of the taxes.
There is so much complicated economics in the proposed contract. And the administration has been lecturing and innundating the legislature with over a thousand pages of painful details. But the real simple issue is whether we want to be a corporate state or a democratic state for the next 45 years. Do we want to surrender the legislature’s taxing authority and our democratic rights to initiative so that the oil companies can feel safe and secure with stable fiscal tax rates. Or do we want to retain our democratic right of initiative and retain the legislature’s constitutional mandate to be the primary taxing authority in the state.
The Fiscal Interest Findings by the Commissioner of the Dept of Revenue identifies all sorts of risks–market risk, shipping risk, completion risk, environmental risk, permitting risk, negotiating with Canada risk. And for all of these types of risks, it offers a balanced view of what could or could not happen. And it offers ways to mitigate (lessen) these risks through variious means. But when it comes to fiscal risk (future taxes), the Fiscal Interest FInding says that the oil companies will simply “not take this risk.” The oil companies insist that the contract is not possible without fiscal certainty for 45 years. This claim is not credible. All other types of risk can be mitigated, negotiated, or hedged. Fiscal risk that the oil companies face can also be mitigated, hedged, or negotiated. They really are trying to bully the state into signing off on their right to change taxes. And they do not need this certainty to make the pipeline happen.
For me, the propsed contract is about a very important choice–do we want to sell out our democratic rights to the oil companies for economic security? If you want to tug at heartstrings, I would ask the policy makers, do you want our children and grandchildren to be free to vote, think, and participate in public policy? Or do we want our children to be good workers, content with the monetary largess of the the oil companies, but with none of the rights of a cititzen to contribute to oil industry public policy. The proposed contract would deprive future legislators–who have not even been borne yet–from having any meaningful contribution to the public policy debate on oil and gas industry taxation, the single most important economic public policy issue in the state. We are telling our children and our grandchildren that their thoughts as citizens on oil and gas taxation public policy do not matter. They will just have to accept money and jobs from the oil companies as compensation for being deprived of their democratic rights. We are selling our democracy to BP, EXXON MOBIL, and CONOCO PHILLIPS. It is blatant and appalling to me.
ldw