I’m voting yes on Ballot Measure 1 to repeal SB 21, the so-called More Alaska Production Act. On Aug. 5, ADN published an article by reporter Richard Mauer titled “Revenue forecasts: 'Facts’ used in oil tax debate may not be.” He described how both sides of the oil tax debate relied on Department of Revenue forecasts of oil production and tax revenues to support their arguments. But the “facts” reveal nothing about the effectiveness of SB 21 to change industry’s investment behavior to develop Alaska’s oil resources.
A yes vote will reinstate the ACES tax system that SB 21 was purported to “reform.” ACES was all about investment. ACES offered tax credits and tax deductions for new exploration and capital expenditures. But in order to get these credits, industry had to invest here -- in Alaska. In return for these generous credits the ACES tax system allowed the state to share in future upside returns with industry.
SB 21 has no such mechanism to assure that tax savings realized by oil industry will be plowed back into Alaska. Instead, its advocates have had to appeal to forces of the free market to achieve this goal. But while the oil industry in Alaska is a free market, it is not a competitive market. In a truly competitive market (the Bakken shale oil play in North Dakota?) overall industry investment behavior is more predictable. The decisions taken by a single company have only a small impact on the industry as a whole. But the Alaska oil industry is dominated by the decisions taken by just three companies. We take it on faith that the Big Three always rely on cold calculations of rates of return and other investment metrics to budget for their Alaska projects, but overall corporate policies and the views of Wall Street stock analysts also hold sway in these decisions.
Access to resources, divestment opportunities and basin control have substantial impact on the investment decisions of Alaska’s Big Three. ConocoPhillips has pursued exploration opportunities in the National Petroleum Reserve-Alaska but the pace to develop these has been stymied by environment opposition. ExxonMobil has finally now moved ahead to develop Point Thomson. As a result, ExxonMobil, as the largest holder of North Slope gas reserves, will dictate the pace of development and the ownership of the gas line. In the aftermath of the Macondo well disaster, BP is divesting its Alaska assets -- the sale of its ownership in Milne Point, Northstar, Endicott and Liberty to Hilcorp is the case in point.
Easing taxes under SB 21 will have little influence on these decisions. So we debate how SB 21 will affect state tax revenues and a hope for more production. As Richard Mauer suggests, those are facts that are debatable.
The central fact about Ballot Measure 1 is simple: it is about political influence. We face a choice to assert what we believe is best for ourselves and our political future or cede substantial control over this future to the oil industry.
The massive campaign spending from industry has made this so. We don’t need economic models and forecasts to answer the question, “What future candidate for any elective office will ignore the impact of this tidal wave of cash?” If this future candidate were to take even a moderate position unfavorable to the industry or assert too strongly to seek the “maximum benefit” of oil development for Alaskans, she will face an opponent overwhelmingly funded by oil industry corporate donations.
What choices will these candidates then offer? In the face of looming budget deficits, what programs will they propose to cut? Education? Public safety? Roads? Will industry outsource these services to government just as it outsources catering and accounting services?
I’m voting yes on Ballot Measure 1 because I want a future where I can debate issues with my neighbors that are important to us without the one-sided, disproportionately funded noise of endless political ads dividing us. We need to preserve the independence that is so much our character as Alaskans. I urge you to vote Yes on One on Aug. 19.
Kevin Banks recently retired from state government service, where he worked for several years for the Alaska Department of Natural Resources. From 2006 to 2010 he directed the Division of Oil and Gas and had a hand in crafting how the ACES exploration tax credits worked to encourage investment from new players in Alaska’s North Slope oil industry. As a resource economist, head of the division’s commercial staff and an involved observer of the Alaska oil industry, he has provided advice to several governors about the state’s relationship with the oil industry in Alaska.
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.