Put Alaskans first and decide on oil taxes

COMPASS: Other points of view

March 21, 2012 

The governor and the Legislature got it right in putting oil and gas as Alaska's No. 1 issue. With decreasing oil production and a looming deficit in the next few years, we do have an issue.

The problem is we are hearing the same old arguments and accusations --one side has sold out to the oil companies with low oil taxes and the other side favors high taxes and is anti-business and jobs. That polarization never gets down to solving the problem.

The issue isn't taxes. The train wreck we face is the dramatic fall in production -- declining 40 percent in the last decade and 5 percent more every year. Yes, taxes are a key element in avoiding that train wreck, but a partisan battle, which ends with nothing done, will not help. What we need is our political leaders to develop a united Alaska position on what is our fair share. Let me explain what I mean.

We have been through this before. I think we can look back to the last successful resolution of a similar stalemate for a model -- a time when Alaskans stood their ground together with a united front. With it we got more oil company investment, more production, and more revenues for education, public safety and our Permanent Fund.

This took place in 1981, a year of then record high oil prices of almost $35 per barrel, production of more than 1.5 million barrels per day, and a political smackdown with some fighting for lower taxes and others for higher taxes. Gov. Jay Hammond created a bold and crafty new approach. In a historic press conference, the Republican Governor brought together Democratic Senate President Jay Kerttula and Democratic Speaker of the House Jim Duncan and together they presented what they called a "united Alaskan position."

It was framed as Alaska's fair share of oil revenues representing a little less than one third of total. They said Alaskans should not receive anything less than that amount. The other two parties, the oil industry and the federal government, received the other two-thirds, making it roughly a one-third, one-third, one-third split. Jay emphasized that fairness would bring stability. This Alaskan fair share worked for almost 20 years, bringing unprecedented state revenues, industry investment and higher oil production.

Today the percentages are far different with the state taking over 50 percent of the revenues. However the model for determining the Alaska fair share that works remains valid.

The train wreck of rapidly declining production seems far different from the increasing production of 1981. Yet there is a startling similarity even there. The end of the Prudhoe Bay field predicted for the late '90s never happened. By all accounts today we are resource abundant, just as we were in 1981. The fields are harder and more expensive to develop, but we know they are there. We are not resource short; rather, we are capital investment short.

The state won't and shouldn't pony up the needed investment dollars. That's the responsibility and the risk producers must take for their fair share.

Almost everybody acknowledges that the status quo is a disaster in the making. What we need is to arrive at the right balance. What we have is a blame game and sloganeering. While that may make for good politics, we know it makes bad policy.

We need to demand that our elected leaders in the House and Senate as well as the governor, Republicans and Democrats alike, work together and hammer out a united Alaska fair share that brings needed revenues for Alaskans, stability in taxes and increased production.

With this model in hand, the complexities of the tax structure will fall into place. I certainly don't know that magic number but I believe -- and I think most Alaskans would also rally behind -- whatever unified Alaska position was worked out.

So we say to our political leaders, "it's your responsibility to determine a united Alaska fair share -- and don't come home without it."

Tony Knowles was governor of Alaska from 1994 to 2002.

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