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ISER director responds to critics of Goldsmith oil tax report

Gunnar Knapp

As director of the Institute of Social and Economic Research at the University of Alaska Anchorage, I’m responding to several comments about Dr. Scott Goldsmith’s recent analysis of Alaska’s current and previous oil production tax systems.

The issues relating to oil production taxes are complex. Any projection of future state oil revenues under either the current MAPA (SB21) or the earlier ACES law requires making assumptions about future oil production, prices, and production costs — among many other factors.

The value of Dr. Goldsmith’s analysis is that it provides a methodology—which anyone can use—for examining the implications of different sets of assumptions for future state oil revenues under either law. This Friday (June 27), Dr. Goldsmith will host a workshop, open to the public, on how to use the model for that purpose. His report, the model, and presentations of the results are posted on ISER’s website at www.iser.uaa.alaska.edu.  The workshop will be from 2:00 to 4:00 in Room 307 of the UAA Consortium Library building.  Parking is free.

Some commenters have questioned Dr. Goldsmith’s assumptions about future production, prices, and costs. Dr. Goldsmith’s report includes his reasoning for the assumptions he used. What is needed is a thoughtful dialogue about these assumptions, rather than assertions that future trends are self-evident. They are not.

Some commenters have argued about the technical details of how Dr. Goldsmith’s model calculates future taxes under the two laws. Any model is necessarily a simplification of reality—particularly for these two complex laws, under which taxes are calculated separately for each company and field. Dr. Goldsmith welcomes suggestions for practical ways to improve the model without making it too complex to use.

Some commenters have argued that Dr. Goldsmith’s analysis should be disregarded because it was funded by Northrim Bank. For many years Northrim has donated to the University of Alaska Foundation to support analyses by ISER researchers of Alaska economic and fiscal issues. As required by the foundation, Northrim has no control over what questions researchers study or their conclusions. Northrim officials did suggest that Dr. Goldsmith study future oil taxes under ACES and MAPA. But the decision to study this question was Dr. Goldsmith's, as are his conclusions.

One commenter argued that Dr. Goldsmith’s analysis should be disregarded because it was not “peer-reviewed.” I am not aware of any analysis of potential future tax revenues under MAPA and ACES that has been peer-reviewed. Scientific peer-review can take months and sometimes years. If an issue is of immediate importance—as with the debate over Alaska oil taxes—should publication of all analyses be delayed until reviews can be completed?

Three ISER natural resource economists, including myself, read and commented on drafts of Dr. Goldsmith report. However, in the end, ISER researchers —  including Dr. Goldsmith — have the final say about, and are responsible for, the content of their reports. Their analyses and conclusions do not necessarily represent the opinions of the ISER director, other faculty, or staff. ISER tries hard to objectively inform the public discussion about policy issues that are often highly controversial, by allowing skilled researchers to frame their own analyses and reach their own conclusions.

The real test of any analysis is its content. I urge Alaskans to read Dr. Goldsmith’s analysis, as well as other analyses of this important and complex issue, to focus on the substance of the analyses and come to their own conclusions.

Dr. Gunnar Knapp first joined the faculty of the Institute of Social and Economic Research at the University of Alaska Anchorage in 1981, and was appointed its director in 2013.

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