The debate over Proposition 1, the repeal of SB 21 that has lowered taxes for large, multinational oil companies, rests on two competing principles.
The first is that the boards of directors of the various corporations have a fiduciary responsibility to institute policies that maximize profits for their shareholders. A key factor in the complex formulae of profit strategies is taxes, specifically how to get constituencies to lower taxes. Boardroom concerns are not the quality of schools, fire or police protection or any of the other services needed for tax-based infrastructure to create a modern culture. Their concern is shareholder profit.
They are modern Ebenezer Scrooges. But, unlike Scrooge, they will not have an epiphany of good will toward humankind. They will not because they do not live at this place. The faceless shareholders are scattered across the globe, and their decisions are based on profit.
Nor are they the "Atlas Shrugged" of Ayn Rand, whose non-corporate owner-capitalism meant offering a good product at a fair price (although John Gault would not like any taxes). To shareholders and the directors they elect, the product is an abstraction; the real product of the corporation is profit.
Alaska’s Clear and Equitable Share (ACES) taxation system diverted windfall corporate profits in the $100+ a barrel range from corporate shareholders to the state treasury. Consequently, the slogan “It’s Our Oil” emphasizing the other competing principle: The people of Alaska own its natural resources and our constitution dictates that those resources be used for the maximum benefit of the people. That’s what legislators and the governor swear to do.
Had we followed this principle to its logical conclusion we would have created our own state oil corporation, similar to Norway’s Statoil. And our permanent fund might be approaching the size of Norway’s $700 billion compared to our $50 billion. Norway took the concept “It’s Our Oil” and turned it into one of the highest standards of living in the world.
Big Oil has been fighting to reduce their taxes for as long as they have been taxed in Alaska. In the 1980s they hired the likes of the affable "Big Ed" Dankworth to lobby the Legislature for favorable treatment including taxation. It didn’t work well for them.
In the 2000s Big Oil moved from bluster to bribery when VECO’s Bill Allen began to ply his craft in Juneau hotel rooms.That didn’t work for them, and we got ACES.
So Big Oil went a different route working toward the election of employees or ex-employees to influential state positions, in effect blurring the obligation to maximize profits for the corporation and the obligation to maximize resource wealth for the people of the state. With his election Gov. Parnell, an ex-ConocoPhillips employee, proposed SB 21, and two ConocoPhillips employee/senators, Kevin Meyer and Peter Micciche, the latter with a little gerrymandering help, pushed it through the Legislature.
That worked for them, and we got SB 21.
Big Oil’s supporters argue that the overall lower tax on oil will provide incentive for them to drill more, produce more, and thereby Alaska comes out further ahead than in the ACES tax structure.
Maybe, but probably not. The reason is that it is a lot cheaper to drive down a dusty North Dakota road or pull into a Nigerian bay, throw in a wellhead and frack out some oil than it is to push a road over a well-regulated and permit-intensive tundra and drill in the cold, unforgiving and very expensive Arctic.
North Slope oil is finite and dwindling because we’ve been pumping it through a 4-foot diameter pipe for four decades. There are pockets to be found, true, but they are costly pockets even if the tax rate is lowered. Bottom line: it is more profitable to produce oil elsewhere. Alaska’s graying oil industry is in late middle age. The day may come when we should reduce the windfall profits tax of ACES, but that day is not now.
In the time we have left, Alaska can transform oil into wealth of a different kind. Wealth in the form of schools, universities, health care and cultural institutions. And we can use oil wealth to help solve our myriad social problems. Taxes collected in a progressive and fair ACES system can build a modern culture of the North. That’s what is at stake on August 19.
Alan Boraas is a professor of anthropology at Kenai Peninsula College.
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.