The Seward Phoenix Log - News of the Eastern Kenai Peninsula since 1966

Repealing oil tax seems short sighted

Op-Ed

 


There are few things as important to Alaskans as a healthy, vibrant and growing economy. That is why we must vote “no” on returning the state to the flawed, old oil tax that worked against Alaska’s long-term interests.

My family and I have lived here since 1972. We have raised our three children here and this is home. Along with other Alaskans who suffered through the economic implosion of the mid-1980s, as a two-term Anchorage mayor and as a businessman, I know and appreciate the benefits of a thriving economy. Without one, Alaska is a very different place.

Alaskans are being asked to ignore fiscal reality and return the state to the old Alaska’s Clear and Equitable Share oil tax, a short-sighted, grab-what-we-can-now tax that worked to ensure fiscal problems in the not-to-distant future.

It contained provisions that contributed to a marginal tax of more than 90 percent at higher oil prices and it did nothing to encourage investment for new oil or stimulate production of a single, new drop of oil on the North Slope. Alaska, by the way, receives 90 percent of its revenues from North Slope oil and production declines have a significant effect on the state’s treasury.

Largely because of the old tax, producers invested elsewhere, where the tax climate was more conducive to their bottom lines and production levels on the North Slope over recent years have dipped. Throughput in the trans-Alaska oil pipeline has fallen from just over two million barrels at day in 1988 to about 550,000 barrels a day now. That trend is virtually guaranteed to continue under the old tax.

While oil production across the nation experienced a renaissance over recent years, it slid here, dropping Alaska – which has more oil than any other state – into fourth-place among the nation’s oil producers, behind even California. Falling production is bad news for Alaska’s treasury, its businesses and its jobs.

The Legislature did the right thing earlier this year when it passed new tax reform to fix the old ACES’ problems and to stimulate production and investment on the North Slope that will allow the state a sustainable source of income for years to come.

Such a tack worked is the United Kingdom. Incentives there spurred record oil and gas investment to help turn around declining investment and production. And it appears to be working here, too. Following the Legislature’s new tax reform, there are signs on the North Slope of increased economic activity, and producers are taking long-delayed projects out of mothballs and bringing on new rigs and investments.

Another very real aspect of returning to the old, unworkable tax would be such a move’s effect on any plans for a large-diameter gas pipeline to export North Slope natural gas to profitable markets in Asia. The old tax treated oil and gas the same way, making gas production unprofitable by virtually any measure. A return to the old ACES tax likely would end dreams of a gas line for the foreseeable future, along with hopes for jobs, an economic boost and future state revenues.

Repealing the Legislature’s new tax reform to return of the old ACES, a tax that served only to grow government and set the stage for future economic maladies, seems short-sighted and certainly not in the interest of future generations.

I urge Alaskans to vote “no” on returning to the old tax.

 
 

Reader Comments
(3)

RayMetcalfe writes:

Forty years in AK, so misinformed. On 4/28/09, Bloomberg Financial reported BP makes less than $2 net profit for producing a barrel of oil in Iraq. On 3/14/10, Petroleum News reported what BP's net profit was under ACES. It calculated to a net profit of $28 per barrel. Conoco's annual report demonstrated $28 per barrel profit under ACES. Can't believe that we Alaskans paid producers 14 times the going rate under ACES? See Business-Week 7/24/09. Want more oil? Break the big 3 monopoly.

Joanne writes:

Increasing oil production and increasing business in Alaska, and thereby the state's income cannot reduce the size of your permanent fund dividend.

EarlRichards writes:

If Parnell's BS 21 is not voted out, then, Alaskans will eventually will lose their Permanent Fund cheques.

 
 
 

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