Net Operating Losses and unique ANCSA provisions resulting in large dividends - pt3

Uploaded by tapiatanova on 23.08.2010

Well, the N.O.L. is a unique situation also. They are available to all corporations that
have resources. I guess, for an example, in our case, where we generated N.O.L.’s is
that we had an oil and gas property that had a expectation of value that had already been
drilled and had a structure in it that we were able to get experts to say it should
of had $600,000,000.00 worth of value to us if the oil was there. Well, in essence, what
that said is that the property we got from the government didn't have the oil, which
our expectations were that it did; therefore, we got to deduct what that value was against
income. Or we got to sell those N.O.L.'s to somebody who could use them. Now we had to
sell that property in order to trigger the N.O.L.. So we sold that particular property,
for instance to an Arco because it was an oil and gas property and we were able to take
the loss because there wasn't a structure there. If you were dealing with timber at
the time you received the property and the timber values was say $ 10.00 a board foot
and by the time you went to log it and sell the timber it was $ 2.00, OK. You could take
a N.O.L. for that. A loss because the value was gone. It might come back at a later time
but it was gone then. And you can trigger that even though you had to sell that timber
low. So again, these were unique I.R.S. provisions
that took some legislative manipulating to make sure they worked for corporations. And
I think the estimate was that if we did this it would probably be four or five hundred
million dollars worth of transactions done. It ended up there was billions of dollars
worth of transactions done which was a good thing for the Alaska Native population.
I look at it as getting a little bite back from the federal government as to the takings
that they had done to us for eons and the American Indians. Again, it was just a little
triumph. For a period of time, we had to fight I.R.S., of course, every step of the way.
But throughout most of it, I think most of the corporations did fairly well.
Not all of them got to use their N.O.L.'s because they cut it off. I think Arctic Slope,
didn't get to use up all of their N.O.L.'s. Some of the others didn't. CIRI was probably
the only one that really did get to use up all of their N.O.L.'s. In the early years,
you could actually sell the N.O.L.'s. The N.O.L. was worth 35 cents on the dollar to
a corporation who had a bunch of income. They could buy those N.O.L.'s from us to offset
their income. So they would pay us 20 cents or 25 cents or whatever it might be on the
dollar for every dollar of N.O.L. that we sold them that they could offset to their
income. So they didn't pay any taxes. So, I thought it worked out well, especially
for us, because we did hit that home run and we did have that offset that allowed us to
generate the kind of dividend we did to the shareholder, non?taxable. Any time you can
give your shareholders a non?taxable dividend it's a great thing.
Well, I guess there's two ways of looking at that. One is from a personal standpoint,
it was more than any college education could have ever gave me. I learned more from more
people that were experienced, whether it was in law, whether it was in accounting, whether
it was in management. In all those areas, it was a great experience for me. I think
ANCSA, overall, was a marginal experience for most people. I think that because the
expectations were so high in the beginning, there was no way that anybody could meet those
expectations. So, it really did generate a lot of dissident feelings throughout the state.
There were some of the things that were done wrong. In the early days, we didn't pay any
attention to the tribal issues. Those really weren't on the table, and those were serious
things to a lot of the subsistence users and the people living in bush Alaska. They always
looked at things from a tribal view, but a corporation has a totally opposite view of
things than tribal. I think it was a mistake that we didn't at
least spend a lot more time trying to understand how these tribal issues worked into things.
Now, it's created, I'd say, a divide between corporations and tribes.
Corporations, of course, really don't want the tribal issue; the tribes from the standpoint
of they have tribal sovereignty power over ANCSA lands if they get that. Ultimately,
that's what some of the fringe wants. That would give them taxation and police powers.
That would really kill the corporation side. I'll give you an example. If ANWR ever went
and Arctic Slope’s lands on the slope, which are 7(i) today, if the tribe had taxation
power over those lands, very little revenue would come back in 7(i), because the tribe
would tax it. I'm sure at a heavy rate to keep all that money within that tribe, and
the corporation wouldn't do that well. Those are issues that need to be looked at, as you
move forward in this. I think that from the subsistence standpoint,
from the tribal side, that's where we really screwed up. The tribes should have absolute
rights and jurisdiction to do subsistence on all Indian land, corporation land or village
lands that they live. And they shouldn't be controlled by the federal or state government.
Those should be tribal controlled issues for subsistence purposes.
I don't think that we realized at the time the impacts that that would have, especially
on subsistence, being a corporation, having our lands, and really not paying attention
to it. And then, being a corporation trying to change that rule to give subsistence rights
under state law, we ran into a stone wall. I don't know if it's even possible, but corporations
aren't set up in a way that really takes care of the views of individuals. It's set up as
a conglomerate to really focus on the bottom line. To some shareholders that's really not
what it's all about. And other shareholders, especially in the case of CIRI, you have all
the major cultures in this melting pot which is CIRI because they come from all over.
And I can tell you a Tlingit will never agree with an Athabascan on issues or Eskimo with
an Aleut. They just have different cultural values. And, for CIRI it makes it very difficult
because you're always walking on a tightrope. It's easier, I think, outside of CIRI in other
regions where you really have a single culture, people that understand it better. And, I think
the subsistence issues are better understood in rural Alaska by the rural corporations.
And, I think they have a much better handle on it than somebody like CIRI or Chugach even
Koniag would have on those issues. Again, I... It's sort of hindsight. You look
at things and you go, “Could we have done a better job of taking care of the shareholders
and the shareholder needs on the subsistence side and their lifestyles when we were doing
ANCSA?” Yeah, we probably could have? But, I think everybody was so focused on trying
to get something while the pipeline was hot. And, even during all of the amendments we
did to ANCSA, I think that was sort of left behind. Sort of forgetting the culture of
things and focused on money. That was probably one of the biggest downfalls because it did
build expectations way too high from a dollar standpoint and left this whole cultural resource
side out of the equation. And, now that's coming back.