Opinions

Oil producers should pay their share — and they are

Oil industry executives, planners and financial managers must pop Excedrin by the case as they deal with the headaches they face while working with Alaska lawmakers constantly on the prowl for more cash and changing the rules as they go.

The industry long has pleaded with the state for fiscal certainty, for stable, sensible tax policies necessary, even vital, to ensuring the huge investments needed to produce oil and gas in Alaska. Those pleas largely go unheeded. While oil companies plan years in advance, Alaska oil tax policy has changed seven times in only the past dozen years. The most recent was only last year.

The Legislature at the 11th hour of its second special session ended North Slope cash oil tax credits, an action expected to save Alaska about $150 million a year in three years' time. While larger companies likely will not feel the pinch, it certainly will sting smaller companies working to find and produce more oil.

Is the industry happy?

[Alaska Legislature passes last-minute oil tax deal]

"Make no mistake: HB 111 will cause companies to rethink their investment strategy in Alaska, meaning they will likely spend less money and employ fewer Alaskans," AOGA President and CEO Kara Moriarty said in a news release after the vote.

"Enough is enough," she said. "The constant moving of the goalposts and continued failure to fully reimburse companies for earned tax credits is not only frustrating, but makes Alaska's chances of attracting desperately needed investment worse with each passing year."

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Cutting the credits, it could be argued, was myopic and damaging to Alaska in the long run, likely fouling the investment climate more than Alaska's incessant tax tango. But, in a way, it was honest. The state already owes about $1 billion in unpaid credits and they remain unpaid because the state cannot afford to pay them. Why continue promising them?

The politics of it was easy. It begs credulity among many Alaskans to pay the industry, even the smaller players, a penny in tax credits when the state is facing a more than $2 billion budget deficit and its savings are evaporating.

Lawmakers, though, did not stop there. They promised to establish a working group to look at the state's oil and gas fiscal policy. That bodes another round of goalpost moving — and that makes the industry itchy.

Globally, an oil glut has driven prices into the tank. In Alaska, the industry has shed about 5,000 jobs over the past few years and the effects are beginning to be felt widely across the state as it sails into economic doldrums.

Alaskans should be worried that increased industry costs and an unfavorable investment climate might harm Alaska's long-term economic picture. The oil industry, after all, is Alaska's economic future. It underwrites 90 percent of state spending and, directly and indirectly, a huge chunk of the economy.

The Alaska Oil and Gas Association hired the McDowell Group to assess industry impact in Alaska's private and public sector economy. The firm says it used detailed 2016 employment, payroll and spending data from 14 of the industry's "primary companies" to analyze their economic impact. Those included production and exploration companies, refineries and the Alyeska Pipeline Service Co.

[Here's what low oil prices have done to Alaska's jobs picture]

The companies last year employed 5,035 people — 4,275 of them Alaskans, the assessment found. They were paid $749 million in wages. The companies spent $4.6 billion with approximately 1,000 Alaska vendors last year, and oil and gas industry spending in Alaska supported 45,575 jobs and $3.1 billion in wages.

There were 6,095 Alaska resident jobs in the oil and gas support services sector. There were 35,205 other indirect and spinoff jobs and income from primary companies' employee and vendor spending in other private and public sectors, the assessment found.

Then, there was state and local government spending of oil and gas industry taxes and royalties, which fund public sector jobs — and indirectly provide private sector jobs and income. That spending (including use of the oil tax- and royalty-funded Constitutional Budget Reserve) funded 58,300 jobs and $2.9 billion in wages in Alaska's economy, the assessment concluded.

The whole enchilada? The "primary companies" private sector employment and wage impacts,  and the industry's funding for Alaska's state and local governments, are huge — 103,875 jobs in Alaska, or nearly a third of all the state's wage and salary jobs. Add to that "$6.0 billion paid in wages in Alaska (including all multiplier impacts and jobs related to taxes and royalties)," the assessment found.

That ain't chicken feed. Few would argue the industry should get a free ride, that it is entitled to special treatment, that it should not pay its fair share of taxes and royalties. Of course, it should pay its way, but as Alaska's legislators mull what fair share the industry should be paying, they should keep in mind the obvious.

Maybe it already is.

Paul Jenkins is editor of the AnchorageDailyPlanet.com, a division of Porcaro Communications.

Paul Jenkins

Paul Jenkins is a former Associated Press reporter, managing editor of the Anchorage Times, an editor of the Voice of the Times and former editor of the Anchorage Daily Planet.

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