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Alaska needs to stand strong, repeal SB 21

Tim Tilsworth
OPINION: Engineer and UAF professor emeritus Tim Tilsworth says SB 21 was born of fear mongering and conflict of interest, and deserves repeal.
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Why vote "yes" to repeal SB 21?

One compelling factor is the despicable politics of how SB 21 came to be. Two employees of ConocoPhillips (Sens. Kevin Meyer and Pete Micciche) voted to pass SB 21, giving their employer huge tax breaks. That’s clearly a conflict of interest, folks -- a symptom of corruption. Legislators said, “Hey, we followed the rules.” That’s a big, big problem. Had those ConocoPhillips employees not voted, SB 21 would have failed, there would be no referendum, and they wouldn’t have wasted your time and money. It’s dirty politics any way you cut it.

Further, the Legislature has turned a blind eye to revising its ethics rules. It’s utter nonsense that our legislators can get away with this. You should be very upset. It’s unacceptable that they won’t police themselves, so you must do it for them.

For years, arguments were that declining production was caused by ACES, there were few jobs, little drilling and little capital investment on the North Slope. Someone even suggested repeal of SB 21 would put the gas line at risk. That’s fear-mongering at its worst. All these arguments have fallen by the wayside. Now you’re being told SB 21 is causing a huge capital investment on the North Slope. What you’re not told is that much of that investment was in Big Oil’s plans for years. SB 21 supporters point out the millions of dollars and extra jobs it will generate while blatantly ignoring the billions generated by ACES, Alaska's Clear and Equitable Share.  Hmm, billions versus millions. How many extra jobs would billions create?

Recently, Scott Goldsmith from the Institute of Social and Economic Research (funded by Northrim Bank) suggested that critics said SB 21 caused the $2.1 billion drop in the 2014 oil revenues. Is that the best Northrim and Goldsmith could do for $100,000? We don’t contend any such thing -- that drop was caused by a mature oil field and inflated industry expenses. I could have told them that for nothing.

The oil industry deducts expenses before paying taxes. The more expenses they claim, the less taxes they pay.  If oil is $100/barrel and they claim $40/barrel expenses, then they only pay taxes on $60/barrel. According to the Alaska Department of Revenue, in 2011, the industry deducted expenses of $29.57/barrel and three years later, in 2014, expenses had jumped to $49.88/barrel -- a whopping 69 percent increase. That’s certainly suspicious, folks.

Escalated expenses sparked the projected $2.1 billion state revenue shortfall -- not ACES. Those expenses may be, and may not be, legitimate. But who knows? The state apparently hasn’t completed timely industry audits since 2007. If the state doesn’t know where it’s been, how can it forecast where it’s going? It’s a ship without a rudder.

When oil is at $100/barrel, I’m unaware of any other place in the world where the industry deducts expenses and still makes $30/barrel profit. While SB 21 may give a $5/barrel tax break for “new” oil, it does not offset the billions generated by ACES. And don’t forget -- the industry owns the pipeline, charges itself a fee, and then deducts it as expenses, to transport the oil. Isn’t that “double dipping?” Further, much of their capital investment and exploration have been bought and paid for by the state of Alaska.

Some want you to believe it’s anti-business to vote for the repeal of SB 21. Absolutely not! It’s courageous to tell government and business that they’re wrong. Big Oil controls 90 percent of the North Slope oil production, and the industry is needed for our economy. But we don’t need to “give away the farm.” The oil industry and “special interest” groups are spending millions to buy the farm -- and your vote.

It’s crystal clear who owns Alaska -- the oil industry and the politicians they support, including Gov. Sean Parnell, who was complicit with these actions. There are ways, which I will address following SB 21’s repeal, to end this veiled corruption and improve ACES.

We’re smart enough, folks, to see through the slick, deceptive ad campaign funded by the oil industry and its lobbying friends.

Let’s take back ownership of our state. Vote "yes" to repeal SB 21.

Dr. Tim Tilsworth is a 44-year resident of Alaska, a registered professional engineer, and is Professor Emeritus of Civil and Environmental Engineering, University of Alaska. He has authored a number of articles about ACES and SB 21.

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@alaskadispatch.com.