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DO THE MATH, IT'S NOT ROCKET SCIENCE

Ray Metcalfe
Mar. 25, 2006

Do the math, it's not rocket science. The Legislature hired one of the world's top oil consultants to advise them. Unfortunately, they don't appear to have heard a word he said.

If you read between the lines of Daniel Johnston's report to the Legislature, he said the Governor's proposal would bind Alaska to a sales agreement that is 35% below what many other oil producers would be willing to pay for Alaska's oil. According to Daniel Johnston's report to the Legislature, the average host country kept 67% of the proceeds when oil was bringing $20.00 per barrel. Now that oil is selling at $60.00 per barrel, on average, oil producing countries throughout the world keep approximately 92% of the sale proceeds from a $60 barrel of oil.

Don't take my word for it, verify the above statement by opening the attached (click here) , a chart clipped from Daniel Johnston's report to the Legislature. Or view the entire report by clicking on "Legislatures Paid consultant Said" at http://repmod.info. Then do the math.

According to Alaska's leading oil economist, Richard Fineberg, Alaska keeps 33% of a $53 barrel of oil and the feds take an additional 13%, for a total of 46%, making Alaska the lowest taxing major oil producer in the world.

Effectively, we pay $32.40 per barrel to BP, Exxon, and Conoco Phillips, for the same service most owner states pay only $4.80 to obtain. Another way to say it, we pay seven times as much as the rest of the world to get our oil produced. If the Governor's proposal passes, we will be locked into a deal to pay about five times as much for the next 30 years.

If our legislature did what it should and doubled our current 33% to 66% and the feds continued to keep 13%, for a total of 80%, we would still be 12% below the world average retention of profits and remain one of the lowest taxing major producers in the world. We would still be paying about two and a half times the going rate for the kinds of services provided to Alaska by BP, Exxon, and Conoco Phillips.

As you view the chart, keep in mind that the chart is upside down from an owner state prospective. It was developed to show oil company executives what countries offer the highest return on investments through the lowest taxes.

If Alaska were on the attached chart, depicting our current tax rate at $60 per barrel, Alaska would appear just above New Zealand and below the United Kingdom.

If the Governor's proposal is adopted, Alaska's chart position would appear somewhere between Mongolia and the Philippines, locking Alaska into an agreement to sell both it's gas and its oil at 35% below the world's average profit retention, for the next 30 years.

A mistake future legislatures could not un-do if the governor gets his way.

The Governor's arguments won't wash with the public if enough people read this email and view the attached chart.

By passing this email on, you will be helping the public find a reference point to apply to the Governor's plan. High taxes? Compared to what? Compared to whom? Without out such a reference the public is unable to ascertain whether to support or oppose the plan.

The increased state revenue would be sufficient to restore revenue sharing, eliminate 100% of all local sales and property taxes, restore power equalization, and pay every man, woman, and child in Alaska a $3,000 annual dividend.

Alaska's future well-being depends on the general public's grasp of the subject contained in Daniel Johnston's report to Alaska's Legislature. It is a publicly owned document. You can reprint and publish it for distribution in any way you wish.

With wide enough distribution, a title wave of opposition to the Governor's plan would soon hit Juneau.


Ray Metcalfe
Achorage

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