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Alaska should have its own oil company; if nothing else, we'd get a bunch of tax credits

  • Author: Don Rearden
  • Updated: June 25, 2016
  • Published April 6, 2016

A few years back, as we were debating how little money we wanted in return for companies taking our oil, I wrote a tongue-in-cheek piece about the need to have a bake sale for big oil. That bit of satire came when those same companies were posting record profits and our own coffers in Juneau seemed overstuffed with whatever fills coffers. Now, with the oil price per barrel smaller than what it costs for a gallon of orange juice in the Bush, it seems that our great state of Alaska needs its own bake sale.

But a bake sale isn't the only creative way we Alaskans could solve our fiscal dilemma, which comes with a political dilemma built-in. The Permanent Fund dividend and taxes are the third and forth rails of politics in Alaska, and we could fire all the state workers and still not solve the problem (though I suggest we start with legislators first). Therefore, we need a creative and comprehensive solution.

The answer came to me when I thought back to the "No On One" campaign a few years ago. Remember that? Where we voted to give the farm away and begin paying the oil companies to take our oil? So now with rock-bottom oil prices, the big companies are laying off workers and stopping those promised new investments. So now we're not just out jobs and giving away the oil, we're also paying them to take it!

So here is my half-baked idea: We start our own damn oil company. Yes, I said it. We start drilling and selling our own oil. Alaska's Oil.

(Insert howls of protest here.)

We can't start our own company, you say.

Why not? I respond.

Well, that's communism! You protest.

No, that's business. We've done it before. OK, so milk and cheese wasn't such a lucrative business to be in when kids want to drink Kool-Aid. But we've run at least one business I can think of quite successfully.

"Oh yeah, name it," you say?

Easy. The Alaska Permanent Fund Corporation. Even its own website declares: "APFC is a state-owned corporation, based in Juneau, that manages the assets of the Alaska Permanent Fund and other funds designated by law, such as the Alaska Mental Health Trust Fund."

Why can't we start a new corporation, take Alaska's oil and sell it, and use the proceeds to fund government? We could pay for roads and bridges, and even roads that lead to bridges that go nowhere. We could pay for schools! And jails! And schools in jails!

According to Alyeska Pipeline Service Company, 185,582,715 barrels of oil went down the pipeline in 2015. That's right. Almost 200 million barrels. Yet our own Department of Revenue forecasts that tax loopholes mean we will receive zero oil production tax revenue from every field that's gone into production after 2002, and any future ones in the next decade. Zero. But wait, there's more! Next year we are expecting to pay oil companies $825 million in cash credits and $150 million in non-cash credits. We're actually borrowing money to pay tax credits, Gov. Bill Walker said recently.

You read that right folks, we are borrowing money to pay the oil companies to take our oil.

Time for a creative solution, right?

Look. This makes perfect sense. If we had our own oil company, maybe we could get in on that lucrative stream of tax breaks ourselves. Plus, a bunch of our legislators already work for oil companies, so one would think they have the needed experience (of course, that is if we don't fire them first, as in my suggestion above) to help get Alaska's Oil Company off the ground. If our legislators claim to know what is right for Alaska and the oil companies, shouldn't they also know what is best for Alaska's own oil company?

Our University of Alaska system already produces first-rate engineers, oil workers and business people. We've got smart folks here in our fine state. I think we can find and sell oil. We could probably even pay someone to find and sell our oil and still do better than we are now under this current scheme.

We could probably even find someone to buy all the "old" oil that has just been laying around out there. It wouldn't even have to be this fancy "new" oil we're paying the companies to produce.

We could take all the profit from the oil, put some money in the PFD, pay for government services, create a small-business opportunity fund, and then invest in the real future of Alaska -- our children -- and make the best education system in the world. We could also do the unthinkable, and take some of that money and think a little ways down the road, perhaps beyond oil.

It's our oil and our future. Let's quit giving away our only source of income and turn the fiscal tide.

We could start by having a contest to name the new state oil company. Ten bucks a chance, plus a brownie from the bake sale. But not one of those 'special' brownies. We haven't licensed anyone to sell them yet, let alone figured out how to tax it properly. Which ultimately brings me to my final point.

We won't dig out of the hole that lawmakers are trying to bury us in unless we strike oil in the bottom of the pit or decide to climb out together, without standing on the backs of the most vulnerable Alaskans.

Don Rearden is a professor at UAA and the author of the novel "The Raven's Gift." Learn more at Donrearden.com. He and author Benjamin Percy will discuss the craft of fiction at "The End Of The World As We Know It" Thursday, April 7 2016, at 7 p.m. at the Anchorage Museum.

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@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any web browser.

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