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Compass: Alaska is an owner state, and needs to act like one on oil taxes

  • Author:
  • Updated: September 27, 2016
  • Published March 9, 2013

Alaskans struck a deal with Congress when we won statehood to own our natural resources. But the fight continues over who will benefit from their development. Gov. Sean Parnell's Senate Bill 21 threatens to give away great value from our oil resources without guarantees that production will be increased or that the giveaway will ever be repaid.

When we became a state, the U.S. Senate wanted a guarantee that if we received 100 million acres for our statehood entitlement we would use our lands, waters and resources to pay our own way. They feared that Alaska, with our far-flung population and little infrastructure, would be an on-going burden on the federal budget.

Because of this history, we refer to Alaska as the "Owner State." The idea of Alaska, indeed all Alaskans, as the "owners" of our resources is not wishful thinking. It is rooted in federal law.

To enable us to stand on our own feet economically, Congress insisted in the Alaska Statehood Act of 1958 (Section 6i) that "mineral lands so granted shall be subject to and contain reservation to the State of all the minerals in the lands so sold." And they added a threat. If the State disposes of its lands and minerals "contrary to the provisions of this section, (they) shall be forfeited to the United States."

Stated another way, the Natural Resources Article in our Constitution (Article VIII Section 2) says: "The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people."

Since 1999, a group called Backbone has worked to explain to the Alaska people and our policymakers what it means to be an owner. We were formed when a dozen Alaskans of all political persuasions came together to fight the take-over of ARCO Alaska when BP merged with Atlantic Richfield. If successful, BP would have controlled over 70 percent of both the North Slope oilfields and the trans-Alaska pipeline.

To make our case to the Federal Trade Commission, Backbone's early leaders flew to DC. After they told our story, the FTC Chair said, "We only get involved when there is a monopoly among companies."

The Alaskans responded, "But Alaska is a company. We own Prudhoe Bay, and we own the oil."

Convinced, the FTC filed the largest anti-monopoly lawsuit in its history -- $1.2 billion. Within two weeks, BP divested itself of ARCO, selling it to Phillips Petroleum that later merged with Conoco. This victory guaranteed at least some measure of competition on the Slope.

Since then Backbone helped defeat Gov. Frank Murkowski's proposed contract with the Big 3 North Slope oil producers to build an Alaska gasline to the Lower 48.

We applauded Governor Sarah Palin's support for the legislative initiative to replace the Petroleum Profits Tax of 2006. The PPT was enacted amidst the scandal that sent five legislators and lobbyist Bill Allen to jail. When Palin advanced her own petroleum tax re-write called ACES (Alaska's Clear and Equitable Share, 2007), we strongly endorsed its "progressivity" component whereby Alaska shares the downside risk with the producers during low oil prices and the upside gain when prices are high.

Gov. Parnell, having worked for Exxon and ConocoPhillips, has an extra responsibility to be sensitive both to any appearance of or actual conflicts of interest regarding our taxing policy. So far, lacking that, it is both prudent and valid to be highly critical of his proposals, especially when his approach guarantees large revenue losses to the state, without any assurances of any pay back, let alone positive return.

Let your Senator know it's time to slow down, make sure everyone understands how much could be lost and find a better solution than what is being offered. Our constitution and the deal we cut for statehood are at stake.

Malcolm B. Roberts, a member of Backbone since its founding in 1999, worked as an aide to the late Gov. Wally Hickel for nearly 40 years. He is a Senior Fellow at the Institute of the North specializing in the Alaska commons and the Owner State. Other contributors to this commentary are David Gottstein, Backbone co-founder; Cindy Roberts, author of "Cracking the Code 2012: A Citizen's Guide to the Alaska Natural Gas Pipeline Discussion;" and Ceezar Martinson, a UAA junior. All are members of Backbone.