It's our oil. You've heard that a lot. But what does it really mean?
After being elected to the state Senate in 2006, I had the opportunity to talk with Gov. Wally Hickel about resource development. He talked often about Alaska being an "owner state." This is because we own the oil and minerals beneath our land. We got these rights so we could survive as a state.
In 1967, ARCO had drilled a number of dry holes and was about to leave Alaska. Gov. Hickel famously urged them to drill in Prudhoe Bay, saying, "You drill, or I will." When questioned by a surprised ARCO geologist, Gov. Hickel said, "You're damn right I will. It's our land and our oil." ARCO did drill in Prudhoe Bay, and discovered one of the largest oil fields in the world.
Sadly, our new philosophy today appears to be, "You drill, or we will ... give you massive tax breaks while getting nothing in return." This is not acting like a sovereign. This is not acting as an owner state.
Let's review the historical record.
For roughly 30 years, we had a tax structure called ELF -- with one of the lowest tax rates in the world. The oil industry persuaded us that low taxes would lead to more production, more jobs, more investment. By 2006, 15 of 19 oil fields paid ZERO production taxes.
How did it work? Oil production plummeted from 2 million barrels per day to 858,000 by 2006. At a time when oil was at all-time highs, jobs and investment dropped. Alaska lost hundreds of billions of dollars. The oil industry was harvesting oil out of Alaska as fast as it could and not reinvesting here, instead investing in places like Venezuela, where Hugo Chavez had a 95 percent tax rate, Libya, where Gaddafi charged a 95 percent tax rate, Khazakstan, 90-plus percent, Russia, 90-plus percent, China, 90-plus percent.
We finally said enough is enough in 2007, and enacted ACES. We said, if you're going to simply harvest our oil, we're going to get our fair share. But if you act as a partner and reinvest here, we'll give you the most generous tax breaks in the world.
Did it work? Well you've heard the stories of how nobody wanted to invest in Alaska under ACES? False. Oil company investment increased 70 percent under ACES to all-time highs every year.
You heard the oil company ads about how jobs left Alaska? False. Jobs increased to all-time highs every year, although the oil companies were hiring 50 percent nonresidents, while putting resident Alaskans in television ads to talk about how they lost their jobs.
You heard the oil company ads about companies fleeing Alaska? False. There was a 383 percent increase in the number of oil company tax returns filed under ACES.
You heard Alaska was not profitable? False. BP, ConocoPhillips and Exxon Mobil made over $40 billion in profits under ACES. They enjoyed rates of return of over 123 percent at Prudhoe Bay and 50 percent Slope-wide. That's way more than in Norway, 17 percent; Canada, 15 percent; and North Dakota, 25 percent.
ConocoPhillips executives acknowledged during a 2011 investor conference call that Alaska has "strong cash margins" and offers "very good rates of return." Several weeks later, Conoco's CEO flew to Alaska on a private jet and said Alaska was a terrible place to do business, give us billions in tax breaks.
So what about production? Alaska has sadly become a warehouse for the oil industry. We issue leases and currently hundreds of them sit idle while they develop other places around the world. Look at Point. Thomson, one of largest undeveloped oil and gas fields in North America. Exxon sat on that lease for 30 years. Finally, we said enough is enough, and yanked their lease.
They sued us. But today Exxon is spending billions developing Point Thomson because we finally acted like a sovereign. Because we said, "You drill, or we will." Ironically, much of the increase in jobs and investment you hear about in glitzy TV ads now, which is wrongly being attributed to SB 21, is from Point Thomson.
So SB 21? Is it a giveaway? Well, according to Gov. Parnell, had SB 21 been in place instead of ACES for the past six years, we would have lost $8.5 billion. And they projected we would lose an additional $4.6 billion over the next 6 years.
But what about all the oil company ads telling us we're getting all this new production under SB 21? False. Gov. Parnell set a goal of 1 million barrels within 10 years, saying oil tax cuts were "vital." He got his tax cuts. His latest estimate, as of April, including all the supposed new investments from SB 21 -- 285,600 barrels per day. A 45 percent decline in the next decade. A bigger decline than was projected under ACES.
The oil industry now says, "Give oil tax cuts a chance to work." We did that -- for 30 years.
SB 21 took us back to a failed policy we had in place for three decades and cost us hundreds of billions in lost revenue. We got nothing in exchange for this bill.
Early voting has already begun. When you go to the polls, vote to ensure Alaskans receive a fair share of our oil wealth. Vote for a bright future for our kids, jobs for Alaskans, and a healthy and robust oil industry. Vote as if you and I were the owners of the vast reserves of oil beneath our land -- because we are.
Bill Wielechowski has served in the state Senate since 2007.
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.