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Oil tax cut tramples Alaska constitution

Joe Paskvan

Alaska’s constitution contains an explicit provision which requires that Alaska’s resources are for the maximum benefit of Alaskans, not corporate interests no matter how powerful.

The Alaska Constitution is threatened by SB21’s resource giveaway. It must be recognized that the corporate goals of Big Oil are not the same as Alaska’s. At the time of statehood and now, it is known that Alaska’s vast resources attract corporate interests which are motivated by profits to exploit our resources. Alaska’s constitution requires the response: NO to resource giveaways.

Two great dangers from exploitation were known at the statehood constitutional convention. “The first, and most obvious, danger is exploitation under the thin disguise of development.” The second danger is the acquisition by corporate interests of “areas of Alaska in order NOT to develop them” in order to keep them from competing “with their activities elsewhere.”

It is a myth and manufactured crisis that oil throughput decline is caused by Alaska’s production tax.

Because this topic is complex, most Alaskans -- and many legislators -- do not understand the technical reasons why oil production has declined steadily for 25 years. Oil throughput decline is the result of treatment facility constraints, the limitations on capacity to get oil out of the facilities, which were designed, engineered and intended by Big Oil decades ago.

In 1993, BP and ARCO stated that: “The onset of decline was a direct result of limited gas handling capacity as opposed to limited oil production capacity.” A 2002 article states: “oil production in the ... fields is constrained by the gas handling limits of the surface facilities.” It is an established fact that decline started in 1989 and has nothing to do with tax rates. The TAPS oil throughput for each year of the last 25 years is the result of designed, engineered and intended facility limitations imposed by Big Oil; this is part of a harvest mode resource extraction model.

Alaska’s role for decades has been described as a cash cow to “fuel growth elsewhere” in Big Oil's worldwide portfolio.

In 2002, Alaska’s Director of the Division of Oil and Gas warned that Alaska was overdue to transition from an economy dominated by Big Oil’s oligopoly powers to a more open and competitive oil industry in Alaska. In 2002, it was stated that we were long past the time that Alaska should tolerate the near-monopolistic control by the Big 3. More than a decade ago, the “3 majors had near monopoly which raised barriers to new entrants.” These words are frightening. SB21 has the potential to turn independents and other world majors away from Alaska, putting the Big 3 more firmly in concentrated control of our resources.

The transition to more independents, which started under ACES with its capital investment credits, may slow or stop because of the elimination of capital credits -- which attract actual investment here in Alaska. Alaska now offers capital credits and was not waiting for the Big 3 to determine when they might develop our resources. Will the Big 3 “near monopoly” return with even greater control of Alaska’s resources after capital expenditure credits are squashed by SB21?

Alaska has a promising and enduring future if we don’t give it away; billions and billions of barrels of conventional, heavy and shale oil will flow through TAPS for generations to come.

Alaska’s constitution should not be trampled and our resources should not be exploited. The economic goals of corporate interests, especially those with near monopoly powers and a history of corruption of the public process, are not similar to Alaska’s goals. The SB21 tax giveaway with 1) no benchmarks to legitimately measure real increased production, 2) no sunset to provide Alaskans with an opportunity for realistic reassessment, and 3) no established reinstatement of the current tax structure when the giveaway tax bill fails is a trampling of Alaska’s constitution and an exploitation of our resources.

Joe Paskvan lives in Fairbanks and is an attorney at Paskvan & Ringstad. He served as a Democrat in the Alaska State Senate from 2008 to 2012, including a year as co-chair of the Senate Resources committee for 2 years focusing on North Slope development and oil taxation issues.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch, which welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com.