Wielechowski peddles false oil profit narrative



Sen. Bill Wielechowski, who has long been a foe of the oil industry, is peddling around the Capitol Building a memo written for him by Legislative Research Services that says ConocoPhillips makes more money in Alaska than anywhere in the world.

Wielechowski, Sen. Tom Begich and other Democrats have drawn the conclusion from that memo that ConocoPhillips should pay more taxes, using the old “our fair share” argument.

The problem with Wielechowski is that he didn’t read the footnote of the memo, which states:

“Please note the barrel of oil equivalent measure is primarily useful as a means of comparing total hydrocarbon energy produced between geographic locations.¬†Because it does not capture widely varying economic factors underlying that production, drawing conclusions on profitability based solely on this measure is problematic. Further, please note that the amount of energy provided by a given volume of crude oil (or any fuel) varies by production location or, more precisely, by the grade of oil produced and the results of its ultimate refinement.”

What that means is that oil producers in the Lower 48, such as ConocoPhillips, are selling barrels of energy that are made up of oil and gas. The gas is a cheap product that lowers the total value of the “barrel of energy equivalent.” But producers have to sell it off so they can get to more of the high-value oil.

With “barrel of energy,” it makes it look more profitable to drill in Alaska, but the per-barrel comparison is false. In certain parts of West Texas, gas is so plentiful that producers are actually paying for it to be hauled away. So comparing the profits on barrels of energy is simply not valid.

In Alaska, each barrel is all oil, at a much higher value. It’s not true that ConocoPhillips makes more per barrel of oil in Alaska, because it costs the company more to produce the oil in the highly technical world of Arctic oil development.

But it’s the same argument Wielechowski has been peddling over the years as he tries to ratchet up taxes on oil companies.

Alaska is such a big portion of the ConocoPhillips portfolio that the SEC requires it to report Alaska separately. None of the other companies doing business in Alaska are required to do so. This is why the Legislative Research Services report focuses only on ConocoPhillips.

[Read the Legislative Research Services report here]