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Fear is the oil industry's most powerful weapon

Steve Haycox
OPINION: Columnist Steve Haycox says the oil industry is up to its old game of fear-mongering - and Alaskans should know better than to tremble. Pictured: Flow lines at Prudhoe Bay. Photo courtesy of same / ADN reader submission

One of the most persistent choruses heard in the debate over the repeal of SB 21, Ballot Measure 1 on the primary ballot, is that if the repeal passes, the oil industry will cease its investments in the North Slope, undertake no new exploration or development, and but for routine maintenance, leave Alaska. As a result, there will be no new oil for the pipeline, Alaska’s economy will go quickly into deep deficit and soon fail, and as jobs evaporate, people will have to pull up stakes and leave Alaska. This is a principal reason many people offer to explain their intention to vote “No.” Some people in real estate, particularly, express great fear that if the repeal passes, home values will drop precipitously, and we’ll see a general economic calamity.

This is an unreasonable fear. As proponents of repeal point out, oil production in Alaska is extraordinarily profitable for the producers. As reported to the U.S. Securities and Exchange Commission, for example, ConocoPhillips’ profits per barrel of oil produced in Alaska in 2013 were $31.15, compared with an average of $8.37 in the rest of the U.S. and Latin America, and $24.40 internationally. There isn’t any place for the companies operating in Alaska to go that’s more favorable. In addition, the operating infrastructure is already in place here, and unlike most oil investment venues, the political landscape is stable. As gubernatorial candidate Bill Walker has said frequently, the only way to get the oil industry out of Alaska would be to drag them out, kicking and screaming.

What then, is the source of the fear people are feeling? The answer is the oil industry itself. Fear mongering has been a mainstay of Alaska oil politics from the beginning of North Slope oil involvement. During the debates in the state Legislature in 1972 and 1973, oil industry spokespersons insisted that if the package of taxes and fees being proposed should be put in place -- 12 percent royalty, corporate income tax, well-head production tax, right-of-way leasing fees -- there’d be no incentive for the companies to do more than the minimum, and the package might even kill the Prudhoe project entirely. That’s the package of taxes and fees they’ve been operating under for the life of North Slope production; it hasn’t stopped exploration or development or production, and it’s been highly profitable.

When revisions of the package were undertaken in 1989, following the Exxon Valdez disaster, revision of ELF, the economic limit factor, again industry spokespersons raised the specter of industry curtailment or abandonment of their North Slope investments. Nonetheless, the package was revised, and production and development continued. In 2006 when Gov. Palin introduced the idea of a progressive tax on industry profits generated by skyrocketing oil prices, the industry cried panic, asserting both that it would be unfair for Alaska to increase oil taxes to keep pace with rising prices, and that the new tax regime would force them to curtail their North Slope investments. ACES passed, and operations and investment expanded. When SB 21 was debated in 2012 and 2013, industry spokespersons made the same arguments, even while simultaneously insisting they could not commit to investing any of the added money they would earn anywhere in Alaska.

Industry fear mongering works because Alaska’s economy is so heavily dependent on oil, which comprises over a third of Alaska’s economic base, and the taxes from which contribute nearly 90 percent of general fund revenue, the money in the state treasury for schools, public safety, roads, and everything else. The industry wants Alaskans to feel that dependency because it makes Alaska politics work in their favor. The more people fear oil’s abandonment of Alaska, the more willing they are to elect people who are pledged to the industry, and have shown that they are happy to do its bidding. Gov. Parnell fits this model, and so does the majority that voted for SB 21.

It should be embarrassing for everyone involved, for the industry so shamelessly and transparently to stoop to such brazen, bullying politics, and for so many Alaskans to so readily fall for it. A vote “Yes” on Ballot Measure 1 is an opportunity for voters to stand and act like Alaskans, not like “frady cats.”

Steve Haycox is professor emeritus of history at the University of Alaska Anchorage.

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, email commentary(at)alaskadispatch.com.