A state that is 90 percent dependent on oil revenues cannot afford to lose 200,000 barrels of production each day -- and continue to prosper.
Yet that has been the state’s fate under the ill-advised oil tax policy known as ACES.
Since ACES passed in 2007, North Slope production has fallen almost 31 percent while production is up everywhere else in the nation. ACES caused Alaska to miss out on the oil boom brought about by high oil prices.
That should concern every Alaskan interested in good jobs, a sound economy and a bright future. It certainly raised my hackles, which is why I joined with other Alaska businesses, Native leaders, unions and a broad cross-section of individual Alaskans to form the Make Alaska Competitive Coalition (MACC) three years ago to advocate for a change to ACES. We funded our efforts with our own pocketbooks as MACC accepts no money from oil producers.
We thought our mission was complete when the Legislature passed -- and the governor signed -- the More Alaska Production Act (MAP) earlier this year. But opponents of tax reform collected enough signatures to force Alaskans to vote on MAP during the 2014 primary election.
So we’re back in the fight -- but with a new name. Under state law, MACC must form a ballot measure group to continue to fight for Alaska’s future. We’re calling our new group "Keep Alaska Competitive -- Vote No on 1," and we hope you will join our effort. You can find out more about our group and our activities at www.KeepAlaskaCompetitive.com. I am the treasurer of the ballot group.
Our role will be to work with groups, organizations and businesses to dispel the myths and misstatements surrounding oil tax reform.
The new law increases the base tax rate from 25 to 35 percent, directly ties incentives to additional production and eliminates the crippling progressivity feature of ACES. In short, it rewards companies for producing more oil, which is what Alaska needs most.
It is key to commercializing our natural gas. The proposed Alaska LNG project can never happen without a healthy oil industry to pay the bills and keep the costs down. Without the oil, the gas can never compete.
MAP fulfills the four principles Gov. Sean Parnell laid out in January of being fair, simple, competitive and tying incentives to more production.
The new law is a good business deal for Alaska because it puts Alaska back in the game. It shifts Alaska’s tax rate from the high end of the global spectrum to the middle so we can better compete for the investment dollars we desperately need to stop our oil decline.
With oil prices at $100 -- where they are today -- only 16,000 barrels of additional production per day results in more state revenues over a five-year period than what Alaska would have collected under ACES.
We know the oil is there in huge amounts -- at least 77 billion barrels of oil equivalent in place on the North Slope. While all of it is expensive, and much of it is technically challenging, Alaska has a 35-year track record of overcoming challenges and pioneering technology that has proven itself over and over again.
Which is why MAP is already producing results, even though it does not go into effect until Jan. 1, 2014. Repsol, BP, ConocoPhillips and new entrant Caelus Energy have all responded with additional development plans, which will result in new production, new opportunity and new jobs for Alaska.
At Dowland-Bach, we invest in our people and our long-term relationships. That’s what oil tax reform does. It asks us to give up a little right now to guarantee good jobs, a booming economy and a prosperous future.
Alaska cannot afford to return to a failed tax policy. I’m voting No on 1 next year -- and I hope you will join me.
Lynn Johnson is a long-time Alaska businessman and treasurer of the newly formed political group, "Keep Alaska Competitive -- Vote No on 1."
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