Compass: Rep. Les Gara argues for guarantee of investment before oil tax cuts

Fran Durner

This campaign is quickly becoming about a $2 billion oil tax giveaway pushed by outside oil companies, the governor and his legislative allies. That bill, HB 110, unwisely gave multinational oil companies the option to take $2 billion in Alaska's oil revenue and spend it outside Alaska, in places like Libya or Iraq.

A loss of $2 billion, spent Outside, would kill our savings, construction industry, police, fire and teaching jobs, and our ability to build needed energy projects.

House Democrats, and the bipartisan Senate coalition, opposed this $2 billion giveaway. We pushed legislation that required new oil investment and jobs in Alaska as a condition for reasonable tax breaks. Our proposal targeted Alaska investment, jobs and production. Kudos to Reps. Paul Seaton and Alan Austerman, who broke ranks from their Republican colleagues and voted against the governor's oil giveaway. Fortunately, this $2 billion giveaway didn't pass the Senate.

As they say, no good deed goes unpunished. Now that the U.S. Supreme Court has ruled outside corporations can spend as much money as they want on elections, it's important for you to be armed with the truth as the oil industry and their allies spend big to elect candidates who'll pass their $2 billion giveaway.

Negative corporate and special interest ads will hit your TV and mailboxes through November. Current ads falsely suggest those who supported the giveaway "acted," while the rest of us supported the "status quo." Unfortunately, you're allowed to mislead voters when you're loaded with campaign money.

You'll get ads from corporate and special interests who've created campaign front groups, like "Prosperity Alaska" and "We Are Alaska." Nice names. Bad ideas. They'll send mailers giving trumped up "F" grades to legislators who voted for incentives requiring Alaska investment, and "A" grades to those who voted for the bill the oil companies want.

Here are a few more facts to keep in mind.

When HB 110 was filed, the Commissioner of Revenue said one of the two goals of HB 110 was to get new exploration in new fields. But in response to committee questions I asked, that rationale fell apart.

BP's head of Alaska operations testified on that bill: "If your question was are we intending to do more exploration, it is not in my current plan."

And Exxon's Dale Pittman testified that if HB 110 passed: "I can't promise you it would lead to increased exploration." Conoco provided no promises the bill would lead to new exploration.

That's not to be confused with new oil production that is moving ahead under current law. Conoco is currently developing the new CD-5 field in NPR-A - a project I and others wrote the federal government to support. And Exxon is required by a settlement with the state to stop its 35-year delay at Point Thompson and start producing there.

This and next year we have more exploration going on than in a decade, because we have incentives on the books that reduce tax payments if companies invest in Alaska. We should keep improving those incentives.

Let's also take two myths off the table. Just adopting unjustifiably low tax rates doesn't work. Until 2006 we had a near 0 percent production tax on 15 of 19 North Slope fields, and most new ones. What did Alaska get? Annual oil production declines of 5 percent -- 8 percent a year, and 40 percent less investment than we have today.

Finally, the major oil corporations "say" they'll invest more if they get their bill. BP points to a heavy oil project called the IPAD. But that's a promise of a project they announced years ago, that's being slowed by technology, not tax rates. Asked if it was technology or tax rates that have slowed this project, Alaska Oil and Gas director Bill Barron testified: "The answer I've been given right now has been technical reasons."

Smart tax incentives that require Alaska investment make sense. I'd also lower taxes at very high prices, where they are arguably too steep. But just giving money away on a hope, wing and a prayer is, well, just giving money away.



Rep. Les Gara is an Anchorage Democratic legislator and serves on the House Finance Committee.