University could have avoided cuts by educating Alaskans on oil taxes

The University of Alaska could have avoided all the cuts it’s facing had it recognized years ago that we Alaskans, unlike any other state, have a collective responsibility to manage a cornucopia of valuable resources that were given to the people of Alaska to develop and sell on the world market to pay for schools and other governmental needs. Not one course has been developed to educate Alaskans on how to calculate the fair market share of the owner’s profits — the profits Alaska should receive for the resources industries around the world take from us. If we don’t manage our resources, our resources will be managed for us by people who want to make as much as possible while paying us owners as little as we owners are dumb enough to let them get away with.

Many Alaskans have been fooled into believing that we Alaskans sold the oil under Prudhoe Bay in 1968. We did not. What Alaska sold was the right to explore and produce whatever they find. Alaska retained the right to raise and lower taxes on production as world markets change. Oil companies are obligated to continue production for so long as Alaska’s tax leaves a fair market share of profits for oil companies in exchange for their production services.

If 10,000 Alaskans were able to calculate the costs of production and delivery and a fair market oil company profit for the production services, if thousands of Alaskans could calculate Alaska’s fair market owner’s share of profits remaining after costs of production and delivery are paid, Alaskans would have rebelled long ago, and Alaska would be getting billions of dollars more for the oil we sell.

Gov. Mike Dunleavy and his supporters have falsely represented Alaska’s options. Demanding world market value for Alaska’s oil would leave a fair payment to the producers and close the budget gap five times over. Do the math. According to ConocoPhillips, after their Alaska expenses are paid, ConocoPhillips is taking home a net profit of $26 per barrel. That is the highest per-barrel return they make anywhere in the world. Their next highest net profit per barrel is $11. So let’s give them $12 instead of the $26 we let them take now. That would put an additional $14 per barrel in Alaskan pockets, and Alaska would still be the highest per-barrel source of profit the oil companies have.

Alaska produces about 500,000 barrels per day, 365 times a year. That totals 182.5 million barrels per year. Multiply 182.5 million barrels by the extra $14 per barrel, and Alaska would have an additional $2.5 billion in its treasury. That is five times as much as Gov. Dunleavy thinks we should cut from the budget. We could reverse all Dunleavy’s vetoes, pay the full Permanent Fund dividend and put an additional $1 billion in savings every year.

Ray Metcalfe was a co-author of the original investment strategy for the Permanent Fund in 1982 and the chairman of the House State Affairs Committee when it took up and considered the bill that created the PFD.

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