Extensive commentary about oil taxes and the potential effect of Ballot Measure 1 has not provided much clarity on the issue. Respected leaders within the state can be found, and are vocal, on both sides of the issue. A bewildering array of facts, figures, and graphs support each perspective leading to stark pronouncements -- “Save our Jobs” versus “It’s a Giveaway.” The level of divisiveness between the two perspectives reflects both the uncertainty in what was passed by the Alaska Legislature and a lack of trust in the legislative process that produced SB 21. Given that the vast majority of state income is derived from oil and gas taxes and royalties, we all have a significant stake in this debate -- the question is, who can one trust and what set of “facts” can one believe?
One aspect of the debate centers on tax stability. Looking back, oil taxes in Alaska evolved along with development of the oil and gas industry. As the industry expanded, becoming diverse and sophisticated, so too did complexity of the associated taxes. Adjustments to tax policies will be needed and should be expected as this process continues.
A key dynamic addressed in tax policy is that oil reserves within the big fields (Prudhoe Bay and Kuparuk) are ultimately finite and as the fields age, production decreases. To maintain the flow of oil through the pipeline (and money into the state’s treasury) requires enhanced production, new oil finds and new development. The current debate is about a tax structure that on the one hand encourages exploration and development of new reserves and maintains or enhances production of existing fields balanced on the other hand with maximizing tax revenue to the state.
Providing incentives (tax breaks) that support development and production while maximizing revenue to the state is challenging. As with the results of any legislative activity, ACES wasn’t perfect. The “progressivity” element (a tax increase tied to oil price increase) intended to take advantage of record oil prices and share revenues between developers and the state was in fact difficult to implement and high enough to inhibit production.
The legislative process to refine ACES and address those tax issues began three years ago. Despite the lengthy legislative process and public hearings along the way, SB 21 seemed to pop out of the legislative session at the last minute with a flat (not a progressive) tax and generous tax benefits for new development. Little to no explanation of this overhaul was provided.
Change in the Legislature's political makeup fueled public concerns about the balance between providing incentives to oil and gas interests with revenue to Alaskans. Did the Legislature consider interests of all Alaskans, industry only, or were they striving for some balance? We don’t know, and as a result, we are left with the bewildering cacophony of voices interpreting legislative intent and forecasting likely outcomes.
This issue is important, and we deserve better from our Legislature and our governor -- the public has raised too many significant concerns about SB 21. Complexity is no excuse to obfuscate intent nor are simple assertions of positive benefits (pass the rose-colored glasses) acceptable. Alaskans deserve a share of profits derived from production of our state resources. Those involved in resource production similarly deserve a reasonable system of taxation. We all deserve to understand what is at stake and how the balance between competing interests is achieved and, importantly, how the tax structure maximizes benefits for Alaskans.
The Legislature needs to revisit the tax debate, address public concerns about deference to oil and gas interests, and present to the people of Alaska (their constituents) a clear explanation of how development incentives will maximize revenue to Alaska. The Legislature and our governor must act on behalf of all Alaskans and develop a revised tax policy that is in our collective best interest. The goal is an equitable (that’s the ‘E’ in ACES) tax share to the state -- SB 21 is clearly not the answer. Vote yes.
Rosa Meehan is a member of Alaska Dispatch News' guest editorial board. She is retired from a long career in the U.S. Fish and Wildlife Service in Alaska and now has her own environmental consulting service.
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.