Big Oil is driven by just one thing: return to shareholders. We need to be perfectly clear about this: the sole duty of any major, publicly-traded corporation is to maximize return to shareholders.
Charitable contributions? A fine-tuned and budgeted payment to encourage good will so as to maximize profits to shareholders. Obedience – for a given definition of “obedience” – to laws? Because fines take away from profits to shareholders. Advertising? To attract customers so as to maximize profits to shareholders. Publicly-traded corporations, and especially Big Oil, are exclusively about maximizing profits to shareholders. You’re just kidding yourself if you think otherwise.
Corporate executives who forget that it’s about profits are sacked by the Board of Directors. Directors who forget are canned by the shareholders. There may be altruism in the world, but you won’t find it in members of the New York Stock Exchange, and certainly not among the members of the Alaska Oil & Gas Association. If Exxon Mobil was altruistic, it would have paid the initial punitive damages award and not dragged the case out for 12 years, fighting it all the way to the U.S. Supreme Court. Never forget: Everything Big Oil does is calculated to the bottom line.
With that principle firmly in mind, let’s examine Big Oil’s actions in response to Proposition #1, which would repeal Governor Sean “Captain Zero”) Parnell’s giant tax giveaway, commonly known as SB 21. Remember that SB 21 did two things. (1) It repealed ACES, the earlier, Palin-inspired tax structure, which had the effect of significantly lowering taxes on Big Oil. (2) It created a wretchedly-designed link for a tax credit for “new oil” produced on the North Slope. All of this was a kind of panic-stricken, Chicken-Little like effort to keep “oil in the Pipeline.” Proposition #1 would repeal SB 21, restoring ACES.
So Big Oil’s response to Prop #1 was to spend more than $10 million trying to defeat that proposition. WC is too lazy to read all the APOC filings himself, but Rich Maurer over at Alaska Dispatch Daily News Whatever has done so and found:
The state’s three leading oil producers — ConocoPhillips, Exxon Mobil Corp. and BP, the beneficiaries of the tax cut — account for most of the opposition money, $10.8 million. Nearly all the rest comes from hopeful producers like Repsol ($729,000), the Alaska Oil and Gas Association ($145,000) and other industry and related organizations.
Big Oil and Respol between them have spent more than $11 million fighting the repeal of SB 21. That’s 100 times as much as the supporters of Proposition #1, who want to repeal SB 21.
$11 million isn’t chump change. It certainly emphasizes how important SB 21 was to Big Oil’s shareholders. Big Oil absolutely wants the first fork of SB 21, the tax cut. But that doesn’t mean they are going to put a single additional barrel of “new oil” in the pipeline. The immediately lower taxes under SB 21 mean the shareholders get bigger dividends. That’s worth at least $11 million to Big Oil.
There will be “new oil” in the pipeline if and only if the total cost of developing oil is lower than, say, fracking oil in North Dakota. If Alaska imposed zero taxes on “new oil” – gave it away for free – and it was less expensive to develop oil in North Dakota, Big Oil would go to North Dakota. Because it’s not about anything except net return to the shareholders.
But, you say, lower taxes make it more likely that development of oil in Alaska is more competitive. The problem with the argument is that for Big Oil taxes are one of many factors in deciding where to invest oil field development dollars. Again, if Alaska gave the oil away without any tax, development would be more likely but it still doesn’t mean any new development on the North Slope.
The $11 million worth of advertising talks about “For our jobs, for our future, for Alaska.” But in the lead up to adoption of SB 21 Big Oil refused to make any commitment to further development on the North Slope. Because Big Oil can’t; it has to act in the interest of its shareholders, and maximize profits. And maximum profits aren’t on the North Slope. In all that $11 million worth of advertising, Big Oil hasn’t made a single firm, take-it-to-the-bank, enforceable in court commitment to development on the North Slope.
All SB 21 does is net Alaska less money on one of its most valuable, non-renewable resources. The only persons who should support SB 21 are shareholders in Big Oil, and its employees. You know, guys like State Senators Meyer and Micciche, both of whom work for ConocoPhillips. The guys who were the deciding votes on SB 21. Or maybe former ConocoPhillips lobbyist Captain Zero. But WC digresses.
The rest of us, the non-shareholders and non-exmployees, should be able to see past the pretty music and pictures and “ah-gosh” advertising, recognize our interests, and vote to repeal SB 21.