Fact-based Corrections to Oil Rhetoric:

Transcription

1 1 Fact-based Corrections to Oil Rhetoric: Analysis of mistakes in the recent article, Setting facts straight on oil rhetoric, by Kara Moriarty, President and CEO of the Alaska Oil and Gas Association By Richard A. Fineberg (Independent Analyst) December 14, Introduction Because Ms. Kara Moriarty is the President and CEO of the Alaska Oil and Gas Association (AOGA), it is no surprise that her community perspective article in the Fairbanks Daily News-Miner on October 22, 2016 reflected a proindustry bias. But it is surprising that although her essay was titled [s]etting the record straight on oil rhetoric, content analysis reveals that her article contained significant flaws in every one of her first ten paragraphs, which undermined the conclusions of her eleventh and concluding paragraph. For example, three of her so-called statements of fact each numbered for emphasis consisted of one incorrect statement and two highly questionable opinions. Of the seven remaining paragraphs that led to her conclusion, each contained one (and

2 2 sometimes more) of flaws that included incorrect statements, omissions of important facts, over-simplification and the failure to distinguish facts from opinions. While AOGA claims on its web site to be fostering the long-term viability of the oil and gas industry for the benefit of Alaskans, fact-based review of petroleum development indicates that the industry s pursuit of corporate profitability in this remote state is sometimes in conflict with the state s public interest. In evaluating this situation, the inherent complexity of petroleum development enables policy advocates to support their arguments by selecting and manipulating economic details, or by omission of other important aspects. For this reason, careful analysis is necessary to provide a balanced overview of this article. In this regard, it should be noted that Ms. Moriarty was not alone in her over-simplified and narrowly focused approach, which failed to recognize important socio-economic aspects of Alaska petroleum development. Moreover, she did not tell readers that Alaska s North Slope petroleum development has been unusually concentrated in the hands of just three major oil companies that have maintained control of more than 90 percent of state oil production since the discovery of the nation s largest oil field nearly half a century ago at Prudhoe Bay. This consolidation of North Slope oil development currently dominated by British petroleum, ConocoPhillips and ExxonMobil stands in marked contrast to oil production structures in the Lower-48, where North Dakota s recent production list shows that in that state it would take approximately 20 companies, not just three producers, to reach that percentage of total production. Taking advantage of this unusual consolidation in Alaska, the three major producers also own a similar share of the Trans-Alaska Pipeline System (TAPS), which is a key market link for all North Slope producers, including their competitors. The unusually consolidated structure in this state has enabled the major North Slope producers to increase their profits at the expense of their competitors -- and the state -- through pipeline tariff overcharges. The chronic TAPS overcharges, also unmentioned in Ms. Moriarty s article, constituted a

3 3 display of dubious company conduct that prevailed during the many years of Alaska s petroleum development. But this wasn t the only questionable performance by the major North Slope producers in Alaska; a second aspect of questionable industry conduct, also unmentioned by Ms. Moriarty, was the distribution of misinformation by major North Slope producers during their campaign to reduce the state s progressive oil tax in 2013 and To help readers remain focused on the article by Ms. Moriarty, certain examples of her mistakes and omissions will be deferred to the appendix section that will follow this analysis. In this appendix, additional information will be presented on pipeline tariff overcharges by the major North Slope producers, along with a picture of the misleading ConocoPhillips slide that was presented half a dozen times during the industry s 2013 legislative campaign to increase company profits by getting rid of the state s progressive oil tax. While the company s errors in this chart will only be discussed in detail when this chart is presented, it should also be noted that multiple distributions of this misleading chart in 2013 were followed in 2014 by an erroneous television advertisement on earlier North Slope production history that was repeatedly run by one of this company s partners. These successive examples of misleading information suggest that the major North Slope producers may have been deliberately confusing the public, a charge of which Ms. Moriarty is not necessarily guilty. Nevertheless, to help improve the public dialogue, the next section of this analysis will present the complete article by Ms. Moriarty, accompanied by critical comments that will correct and clarify her numerous mistakes and omissions. This point-by-point analysis of her faulty article will demonstrate that because many of her arguments on oil industry economics were based on incorrect statements and omissions, her text frequently jumped to erroneous conclusions that distracted attention from the adverse effects of the Alaska oil industry s successful tax cut campaign.

4 4 2. Analysis of Setting facts straight on oil rhetoric In the following point-by-point review of AOGA s October 22, 2016 article by Ms. Moriarty, comments and corrections to her defects will appear in red, while her article will be printed, in its entirety, in 14 black boxes, identified at the start of each with the initials KM. (In five of these boxes, the notation [Continued] will indicate that the text of Ms. Moriarty s continuing paragraph will appear in a following box.) Setting facts straight on oil rhetoric By Kara Moriarty Fairbanks Daily News-Miner (Community Perspective) Oct. 22, 2016, p. A6 [KM Par. #1] Political rhetoric has been heating up in Alaska as the election draws near. Some political activists have even started placing blame for the state s budget shortfall on our oil tax policy, a false statement. [Continued] In the author s opening paragraph statement, the declaration that it would be false to blame the state budget shortfall on Alaska s oil tax policy can be dismissed as incorrect for this reason: Viewed in multi-year perspective, the former progressive tax revenue provision known as ACES (acronym for Alaska s Clear and Equitable Share) helped reduce state budget shortfall at low oil prices by increasing industry tax payments to the state when oil prices were high. Careful analysis of petroleum revenue data also indicated that the former progressive tax regime enabled the producing oil companies, while assisting the state with increased revenues, to maintain strong profits at high prices. Nevertheless, in 2013 the former ACES tax provision was replaced with a flat tax, and this policy change significantly reduced the state s previous ability to continue financing public services when global oil prices dropped. In considering this issue, it should be noted that future oil price uncertainty is a known reality,

5 5 while Ms. Moriarty s peculiarly narrow focus on annual revenues overlooked the possible long-term effects of this petroleum revenue policy change. (For graphic demonstration of the economic background to this analysis, the first two charts in the appendix below will demonstrate the extraordinary quantity of the annual state revenues taken from the state by the 2013 policy revision, as well as the consistent and significant industry profitability achieved by the North Slope producers under ACES before that tax regime was replaced by the SB 21 flat tax.) The idea that the oil industry can fund the entirety of Alaska s $3-4 billion deficit, which essentially would increase taxes on oil companies by more than percent, is completely unrealistic. Although Ms. Moriarty s article was headlined Setting facts straight on oil rhetoric, she immediately followed the fundamental policy oversight in her incorrect opening paragraph with the statement of a 300 to 400 percent tax increase, which contributed to confusion by referring to that increase without providing cash data. This statement therefore failed to inform readers that the potential cash amount of that annual percentage increase was greatly reduced because the tax base at low prices was significantly smaller. Additionally, this argument failed to view the tax results in the long-term perspective that is essential to the understanding of petroleum economics. [KM Par. #2] Fact No. 1: Low oil prices are responsible for Alaska s budget shortfall, not the tax policy. From the standpoint of public policy, when the flaws in Ms. Moriarty s opening paragraph are considered, her so-called Fact No. 1 should be recognized as an incorrectly oversimplified opinion, rather than an accurate factual statement. Although low oil prices played a role in contributing to the current state budget shortfall, as noted above, the 2013 tax policy change was also significantly responsible for that budget shortfall. When viewed in long-term perspective, it

6 6 was clear that previous petroleum industry payments to the state at high prices were lost due to the 2013 state tax policy revision, increasing the state s subsequent fiscal deficit at low prices. But in the next paragraph, Ms. Moriarty immediately went on to incorrectly imply that the oil price drop was the only significant problem: [KM Par. #3] Alaska has seen a sudden and dramatic decrease in petroleum revenues, but that drop is driven solely by price, not by tax policy. [Continued] Her statement that the sudden and dramatic decrease in petroleum revenues is driven solely by price, not by tax policy was not supported by data she presented later in the article, which consisted only of bottom-line numbers from financial experts, whom she described as mistaken critics of the tax structure. Review of the data from a July 3, 2016 dialogue article by attorney Robin Brena in Alaska Dispatch News reveals that the numbers she borrowed from her critics show that the recent state revenue drop resulted from several other factors, which included the geological-caused decline in production volume and the reduction in state share, due to the continued cash credits, combined with the removal of production revenues from the previously progressive tax regime in Without explaining these important details, she immediately followed her failure to recognize multi-causal factors with this peculiar statement: Those who blame our current tax policy for the deficit should know that Department of Revenue Commissioner Randy Hoffbeck has repeatedly stated that SB 21 (current tax policy) brings in substantially more revenue to the state at low prices than ACES (former tax policy). (Senate Finance Committee, Jan. 26, 2015.) Writing from her narrowly focused perspective, Ms. Moriarty did not tell readers that even if the statement by Commissioner Hoffbeck was technically accurate, when these data were viewed in a multi-year analysis the state lost more money

7 7 under SB 21 than under ACES. (As noted above, this is the case because the annual state revenue lost at high prices due to the abandonment of ACES is greater than the difference between the state revenues at low prices under ACES and SB 21.) She also failed to note that the short-term gain to the state at low prices was contrary to the stated purpose of the change in policy that motivated adoption of SB 21 to increase industry cash for investment. Finally, in her rhetorical approach questioning this complex fiscal issue, Ms. Moriarty also overlooked the following questions about the negative impact of this policy change on the consolidated North Slope economic structure: (1) Would the increase of tax revenue at low prices, compared to the former progressive ACES regime (which raised taxes at high prices, and therefore lowered taxes at low prices) pose a short-term problem for smaller oil producing companies, while the major North Slope oil producers would still have the cash to wait for future profits to increase when oil prices rise again? (2) Because the three major North Slope oil producers also own TAPS, at low prices would these companies benefit from the regulated tariff revenues that would guarantee fixed profits, and from TAPS overcharges, which would handicap both their competitors and the state while reducing state revenues? Ignoring these policy issues, she jumped to the following statement: [KM Par. #4] Regardless of how you might feel about our current predicament, blaming our current tax regime is misplaced. This unsupported statement is an opinion that is subject to question because it failed to acknowledge the long-term perspective and other economic questions that were necessary for policy analysis, as well as the inter-related multi-causal facts of industry profitability. Moreover, bottom-line effects of the current tax regime should have been more carefully audited and reported to the public. These shortcomings in the state tax regime that implements petroleum policy, unstated by Ms. Moriarty, contributed to what she described as our current predicament, and therefore deserve attention.

8 8 [KM Par. #5] economic policy. Fact No. 2: Increasing taxes on struggling industry is bad This so-called Fact No. 2 was another questionable opinion that ignored multiple causal factors relevant to consideration of the complex issues of petroleum development and public policy. Additionally, some important factors discussed above remain unidentified in her following paragraph, which dealt with $40 per barrel costs but failed to explain these costs clearly and therefore did not help determine whether increasing taxes would have good or bad effects on state economic policy. [KM Par. #6] Some suggest going back to a historical fair share of petroleum revenues. Let s examine what that really means. According to the Department of Revenue, the average cost for companies to produce and transport a barrel of oil from Alaska to market is about $40 per barrel. This is before industry pays a dime in federal, state or local taxes, not to mention the pipeline and marine costs to move the oil to market. [Continued] Unmentioned by Ms. Moriarty s narrowly focused approach to petroleum policy, review of what Alaska s fair share of petroleum revenue really means demonstrates this state s failure to effectively implement fiscal policies, while contributing to the difficulties in determining what a fair share of petroleum revenue for state and industry would be. For example, Ms. Moriarty did not note the following factors: (1) The state had not confirmed field costs by audits in a timely manner; (2) because the last portions of state fiscal-year price and profit data fall into a different calendar year from the first, state fiscal-year data figures were not readily comparable to national recording of industry profits in terms of calendar-year data; and (3) Alaska s state oil policy did not focus on preventing the three major North Slope producers, who own more than 90 percent of North Slope production and TAPS, from using this consolidation to augment their

9 9 profits by overcharging pipeline tariffs. (As noted above, this consolidated economic structure allows the major producers to handicap the competitive producers who don t own TAPS at the same time that the tariff overcharges reduce state revenue payments.) Ignoring these problems in the continued sixth paragraph, Ms. Moriarty immediately went on to say: Forty dollars per barrel is barely below the average oil price since January ($41 per barrel). Even when prices were lower, from December 2015 through March 2016, and it cost the industry more to produce and transport the oil than it cost to sell the oil, the state still received petroleum revenue, including production taxes. How are Alaska oil producers supposed to absorb a percent tax increase, or any tax increase, for that matter, when the industry is struggling just to break even? Because the three major North Slope producers retain portions of the pipeline costs their independent competitors must pay, the cost and tax numbers that Ms. Moriarty used need to be carefully analyzed and placed in long-term policy perspective with focus on industry profits. But without careful cost audits and profitability data for analysis of the fiscal impacts of the North Slope industry s unusual industry consolidation, Ms. Moriarty s faulty rhetorical questions at the close of her sixth paragraph distracted from consideration of constructive policy responses to the current state budget deficit, which had been increased by the 2013 policy change from a progressive oil tax to a flat tax. To solve the current fiscal problems that have paralyzed this state, this analysis suggests that Alaska should correct its tariff policies to eliminate the major producer overcharges in order to increase independent producer profitability, while re-establishing a progressive tax policy that would enable the state, when oil prices are low, to maintain steady state financing for public services from savings received from industry while maintaining continued high profits for industry when oil prices are high.

10 10 [KM Par. #7] Fact No. 3: The state continues to receive a fair share of oil revenue, even at low prices. Ms. Moriarty s so-called Fact No. 3 was a highly questionable opinion. The state, she claimed, was receiving more short-term tax revenue under SB 21 than under ACES, even though the industry was struggling to break even at low oil prices. Meanwhile, she failed to look at the state s significant long-term revenue loss due to the flat tax. She incorrectly judged both of these tax results to be fair, then repeated errors and omissions in the following data. [KM Par. #8] Critics of the tax structure are mistakenly comparing gross value of the product versus the net revenue industry pays. The example being cited is that in 2012, the gross value of Alaska oil production was $24 billion, and the state was receiving $8.5 billion in petroleum revenue. The argument goes on to say that in 2015, the gross value decreased to $13.8 billion and the state was receiving just more than $1.1 billion. This is inaccurately portrayed not to be a fair share because it is lower than the state s 35 percent historic percentage share of petroleum revenues. But if you look at the numbers in this way, the dramatic drop in oil prices in four years decreased the gross value by $10.2 billion, but state revenue decreased by $7.4 billion during that same time. In other words, even though state revenues have been deeply affected by oil prices, the industry s financial losses have been greater. In the preceding paragraph, Ms. Moriarty did not explain her peculiar and complicated data presentation. Although she drew a line between gross and net revenue when she stated that the critics of the tax structure were mistakenly comparing gross value of the product to net revenue industry costs, she overlooked the fact that in calculating taxes both sets of figures are frequently used together. Then, ignoring her criticism of this comparison, she compared them by stating that the drop in annual oil prices decreased the industry s gross value by $10.2 billion in four years, while state revenue decreased by $7.4 billion

11 11 during the same period. But if industry gross revenue was not a bottom-line number, would comparison to state net revenue be meaningful? In summarizing these results, she also failed to note that the state tax rate was being reduced from the historical average of about 35 percent at high prices in 2012 to less than 8 percent at low prices four years later. Without considering these bottom-line numbers, she continued with the following over-simplified comparison. [KM Par. #9] Either way, the loss of revenue during a price decline illustrates the fundamental problem: The state s share of oil revenue is so enormous that the current price has resulted in significant revenue losses to the state. In following up on the ninth paragraph statement, she did not mention the complexities of subtracting taxes from gross revenues to determine the tax base, or that the state tax credits, originally associated with the progressive tax and therefore increasing at high prices, were maintained by SB 21, which applied those progressive credits to a lower flat tax, therefore costing the state significant but unanticipated revenue losses. From the standpoint of public policy review, it must be noted that Ms. Moriarty s narrow and over-simplified approach failed to carefully identify bottom-line fiscal figures, relevant causal factors and their consequences. Here is what she said in her tenth paragraph: [KM Par. #10] However, even at these low oil prices, and after credits are accounted for, the overall government share of revenues in Alaska is still about 75 percent. As for adding progressivity back into the mix, it s hard to express just how bad a move that would be. Why on Earth, when the state of Alaska just saw its first increase in oil production in 15 years, would we go back to a failed policy that did not increase production or investment? In fact, even when oil prices were sky high, investment in Alaska was stagnant and oil production continued its decline. Alaska voters flatly rejected progressivity two years ago, and for good reason: If Alaska wants to increase oil production, we need investment dollars. If we resurrect progressivity, we lose investment. Period.

12 12 Review of Ms. Moriarty s preceding rhetorical comments in her tenth paragraph indicates that she failed to tell readers that the geological realities of the decline of old reservoirs at least partially explained Alaska s recent oil production drop, while the flat tax replaced the progressive ACES in 2013 with a reduction to the historic production tax rate of 35 percent to a remarkable eight percent under SB 21. In addition to the oversimplifications and omissions of this paragraph, the statement that Alaska voters flatly rejected progressivity may be dismissed as an incorrect opinion for this reason: According to press accounts, the industry outspent its opponents by approximately 20-to-1, with the result that voters rejected progressivity statewide by the narrow margin of 53 to 47 percent (nearly 50-50). Moreover, to correct the geologic and political realities of these factors, it must be noted that Ms. Moriarty s over-simplified conclusion distorted the relationship between progressivity and investment by her failure to quantify and accurately describe economic factors, including the fact that the state received greatly reduced tax revenue under the flat tax that replaced the progressive ACES in 2013, and by her failure to mention important background factors that include the remarkable degree to which oil prices increased in recent decades, despite the fact that the geological realities of the aging North Slope fields resulted in declining production. Instead, she jumped to the following concluding paragraph: [KM Par. 11] Alaskans need real solutions, not bumper-sticker rhetoric. Companies are announcing exciting new discoveries and projects that will add oil into the pipeline for many years, and we should be working together to find ways to make those plans reality. It is time for all concerned Alaskans to think outside the just tax the oil companies more box and advocate for solutions that will actually fix the problem. Kara Moriarty is president and CEO of the Alaska Oil and Gas Association. She lives in Anchorage.

13 13 After opening her final paragraph by stating, Alaskans need real solutions, not bumper-sticker rhetoric, Ms. Moriarty immediately followed with two pro-industry statements that could wind up on bumpers. But when she celebrated the discovery announcement by Caelus Energy of exciting new discoveries and projects that will add oil into the pipeline for many years, she did not discuss the inherent future uncertainties in her follow-up, or the issues associated with natural gas project financing and negotiations. Concluding her article with the optimistic and rhetorical declaration that it was time for concerned Alaskans to be working together to find ways to make those plans reality, Ms. Moriarty instructed concerned Alaskans to think outside the just tax the oil companies more box. Instead of dealing with the current fiscal crisis, future uncertainties and natural gas issues, she simply focused on the search for solutions to fix the current fiscal problem without increasing oil company taxes. In recommending this action in her October 22 article, Ms. Moriarty s oversimplified optimism and her narrow focus on reduced industry taxation were apparently misplaced, since her article had overlooked the fact that Governor Walker s plans to resolve the state budget crisis were running into problems on many fronts that included problems gaining legislative support for his proposals, as well as difficulties dealing with the petroleum industry, with whom complicated state contract negotiations were running behind schedule. Regarding stateindustry relations, it should be noted that six weeks after she published her article, a report by Alaska Dispatch News revealed that Governor Walker, who was trying to secure future funding from Asian utility energy suppliers, had privately written a rather angry letter to ExxonMobil on October 14, in which he asked the major North Slope natural gas producer to cease making comments that he felt were hurting the state s ability to monetize the new, state-funded natural gas project. As these complex developments unfolded, Ms. Moriarty did not discuss and little public attention was paid to -- the history of TAPS tariff overcharges by the major North Slope producers who were the principal owners of TAPS, or to the misleading chart that ConocoPhillips repeatedly submitted to

14 14 the Legislature in the suite of slides in 2013, creating the false impression that the industry s net revenues declined as oil prices increased from $80 to $130 per barrel. In concluding this analysis of the narrowly focused issues and numerous omissions in the article by Ms. Moriarty, it should be noted that concerned citizens in this remote and isolated political entity may fail to focus properly on the state s current budget shortfall due to low oil prices for one or more of the following reasons: Confusion and absence of comprehensive information may cloud the economic picture of petroleum development; respect for the jobs created by exploration and production may combine with the fear that the major North Slope producers, if taxed, will execute their threat to leave Alaska; the profitability of North Slope productions may enable the producers to run expensive and influential public relations campaigns. In light of this background, the mistakes and omissions in Ms. Moriarty s article, which have been identified in this analysis on a point-by-point basis, lead to the following conclusions: Examples of extreme consolidation and dubious conduct of the three major North Slope producers warrant careful public attention. It is important to distinguish annual data with short-term effects on cash flow from the long-term revenue picture. To deal with these problems, the state should provide the public with clear and comprehensive fiscal information that is not available at this time. To lend support to this analysis, the following appendix will present graphics and additional documentation that will call attention to the unusual economic history of petroleum development in this remote state. This background information will also help explain the significance of the numerous mistakes and omissions in Ms. Moriarty s article, which have been identified in this analysis on a point-by-point basis.

15 15 3. Report Appendix Because so much financial data is floating around in this state in controversy, this appendix will add supplementary background information that will call attention to the consolidation and conduct of the three major North Slope producers, while providing documentation to certain points that were not covered in detail in the preceding analysis. 3.A. Oil Price Increases and Industry Profitability (Followed by Abandonment of the State s Progressive Policy System) This appendix will begin by presenting two rather simple historical charts that will provide economic data on oil prices between 1884 and These data, although generally ignored, might have been useful for policy formulation. The first chart provides perspective on Alaska petroleum economics by showing the unusual history of oil prices. In this chart, the brown oil price line (adapted from state data about five years ago) shows that between 1984 and 1998 Alaska s oil price per barrel fluctuated moderately, while remaining relatively close to the horizontal $20 per barrel line for 15 years on the left-hand side of the chart.

16 16 As shown on the preceding page, from the low point in 1998 the significant oil price increase began, resulting in the profitability of the major North Slope producers, as demonstrated in the following chart. Despite the fact that three major Alaska producers were earning remarkably consistent profits under the progressive ACES regime, in 2013 the Alaska major producers campaigned aggressively and successfully -- to drastically cut their oil taxes. Under these circumstances, the following abandonment of the state s progressive tax regime constitutes a policy change that increased the state vulnerability to the subsequent oil price crash. 3.B. TAPS Tariff Overcharges Filed by the Major North Slope Producers (RCA Documentation of Excessive Annual Tariffs) The first of two aspects of dubious company conduct by the major producers that will be presented in this appendix is TAPS tariff overcharges, which increased the pipeline owners profits at the expense of their competitors and the state. This dubious conduct is documented by the Nov order issued by the Regulatory Commission of Alaska (RCA), which demonstrates the effects of the North Slope consolidated structure, under which the major North Slope producers owned the principal pipeline link, reducing their payments to the state and handicapping their competitors by filing excessive tariffs.

17 17 3.C. Archie Dunham s Statement on TAPS Tariff Overcharges The importance of tariff overcharges by the major North Slope producers was briefly identified in a 1996 interview, when Archie Dunham, an official of an independent oil producing company told an interviewer that his company had left Alaska in January 1994 due to the high pipeline tariffs. According to Dunham, it broke his heart to leave Alaska, but the company had to do it because all the value was taken away in pipeline tariffs. In his 1996 interview with Hart s Oil and Gas Investor in 1996, Dunham explained that high tariffs charged by owners of the Trans-Alaska Pipeline System (TAPS) were the principal reason his company had traded its North Slope field to major producer BP and left Alaska several years earlier. Here is what Dunham said:

18 18 According to biographical reports, Dunham, who had taken over as Conoco s chief executive in 1996, had formerly served as Conoco s Executive Vice President of exploration and production between 1992 and After Phillips Petroleum acquired a share of TAPS in 2002, the two companies merged to form ConocoPhillips, and Dunham, formerly Conoco s President, served as the merged company s Chairman until his retirement in 2004.

19 19 3.D. Misleading Chart (Repeatedly Distributed by ConocoPhillips in 2013) While charts can help members of the public place data in perspective and make intelligent policy choices, the failure by ConocoPhillips to provide sources and proper labeling can result in erroneous conclusions that can have the opposite effect, leading to public confusion and misinformed public policy choices. During the industry s legislative tax cut campaign in 2013, the ConocoPhillips suite of slides included this flawed and misleading chart on six separate occasions. This erroneous ConocoPhillips document featured a diminishing green swath at the top of 13 bars of equal height, creating the exaggerated and false impression that when current oil prices increased between $80 and $130 per barrel under ACES industry production profits would decline at state expense. In fact, because the term marginal (ambiguous and undefined by ConocoPhillips) represented additional (not total) revenue, the opposite was the case.

20 20 Notably missing from the misleading ConocoPhillips chart was a clarifying label that would have informed readers that the term marginal share actually represented only a $1 per-barrel price increase -- not the entire ANS West Coast Oil Price per barrel. But the mislabeled vertical bars incorrectly appeared to represent the gross value and total profits per barrel -- not the marginal $1 per barrel price increase, which was only a tiny fraction of the total profits earned at increasing prices. From the standpoint of the confusion that arose from the ConocoPhillips chart, it is important to recognize that this confusion arose from the company failures: (1) to define the chart terms; (2) to identify the data source and its cash figures; and (3) to draw a clear distinction between future revenues and the current prices shown on the chart. Regarding the latter point, if future prices soared to levels never seen before, the institution of a simple tax cap could have enabled the state and industry to share profits equally. 3.E. Concluding Note While this report stands on the merits of the point-by-point analysis in its main section, these appendix details lend additional support to the observations of the preceding section. For example, Ms. Moriarty s support of the industry overlooked the dubious company performance, which, as noted in the preceding section of this appendix, was demonstrated by the repeated distribution of a flawed and misleading chart by ConocoPhillips in By way of background, here is an ironic concluding note to this appendix: In Ms. Moriarty s Alaska Dispatch News commentary, a similar article that was published on October 8 (ten days before the Fairbanks article was printed), she challenged the views of Anchorage attorney Robin Brena with this statement in her opening paragraph: Brena is certainly entitled to his own opinion. However, he is not entitled to his own facts. This phrase was borrowed from Daniel Patrick Moynihan, a famous senator and sociologist, who taught the American public several decades ago to distinguish between facts and opinions when dealing with political controversies. Here is Moynihan s original statement:

21 21 Everyone is entitled to his own opinion, but not his own facts. Despite Ms. Moriarty s adoption of this approach, she frequently failed to adhere to this distinction when she identified her opinionated conclusions as so-called facts, even when she numbered them for emphasis. Additionally, Moynihan s oftquoted statements contain the following two insights that might be seen as raising questions regarding Ms. Moriarty s support of corporations (not to mention her use of general statements, rather than specific data): The great corporations of this country were not founded by ordinary people. They were founded by people with extraordinary intelligence, ambition, and aggressiveness. The single most exciting thing you encounter in government is competence, because it's so rare. From the standpoint of public policy, these statements by the Daniel Patrick Moynihan, the author of the distinction between facts and opinions, call into question the grounds for supporting both corporation and government performance. And the ironic facts summarized in this appendix lend additional support to the report findings that Ms. Moriarty s bumper-sticker comments were not supported by careful analysis, and therefore may be disregarded. Irony aside, Ms. Moriarty s failure to distinguish facts from opinions is found in many of the faulty points in the main body of her Fairbanks report, which she erroneously claimed to be setting the facts straight on oil rhetoric. In this regard, the numerous mistakes and omissions by Ms. Moriarty, who is serving as the President of the Alaska Oil and Gas Association, underscore the need for the state establishment of a clear and comprehensive data system in this remote state. The improved data system will help this remote state prevent the adverse effects of misinformation by corporate advocates, and will help the public deal with the extreme consolidation, dubious conduct and misinformation on the part of the three major North Slope producers.