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Lack of information reason enough to repeal so-called 'oil tax reform'

  • Author: Peter Blanas
  • Updated: June 29, 2016
  • Published July 26, 2014

We've been told endlessly that SB 21 will lead to "more Alaska production" but that it won't cost us very much in lost revenue. But what's the real truth? While the industry points to self-serving analyses, the governor himself, through his Department of Revenue, tells us to expect no additional oil, and that the state will receive enormously less oil revenue this year, as a result of SB 21.

That's right. Even as we see and hear endless advertising on how great SB 21 is, the governor is saying oil revenue will decline catastrophically this year and into the future. This information, while not prominent, is published in the Alaska Department of Revenue "Revenue Sources Book," found readily online (Fall 2013, pages 32-49). This semiannual publication is the official description of where the state expects funding for the year.

How can this be? How is it that we're told on the one hand that SB 21 is just great, while on the other hand the state is saying (very quietly but officially) that there will be no new oil, and that oil revenue this year will plummet like an anvil, as a result of SB 21?

The most likely answer is this: When the state Department of Revenue makes funding projections, they're subject to Securities and Exchange Commission rules. Federal law prohibits them from making false or misleading statements to bond investors, who have a need to know, about the financial outlook of issuing agencies. Bond investors make decisions based on this information. And the administration is thus compelled to be truthful, by federal criminal statute.

So we should expect no more oil, and certainly no more revenue, under SB 21, which is the basic premise for most of the supporting arguments. But the question remains: Does more oil in the pipeline benefit Alaska? Under the right circumstances, if Alaska receives a fair share of the upside (under ACES), absolutely it does. Under the wrong circumstances, where the leaseholders take our oil away while we watch, no. It makes no sense to hand over our very valuable and finite resource, for substantially less than its worth, at a faster rate.

The primary driver in North Slope activity now is the high price of oil. At these prices, the industry will go wherever the oil happens to be. And despite what they tell us, taxes don't weigh very heavily in those decisions, as evidenced by their continued presence in countries around the world with effective tax rates twice those of ACES. As of right now, the industry is in high gear worldwide in pursuit of oil. From our own North Slope to Norway. From Australia to Zaire. They aren't leaving Alaska anytime soon, so long as there's oil in the ground and immense profits to be made.

Alaska has always been, and continues to be, an enormous profit center for the industry, even under ACES. Then why are they so desperate for "oil tax reform"? There are billions of very good reasons, as outlined above. Lobbying for a massive tax reduction is easier, and cheaper, than producing oil.

Also worth mentioning: The oil industry pays monthly tax returns to the state. "Oil tax reform" went into effect at the beginning of this year. The Department of Revenue has received monthly tax payments since then, and has the data to compare earnings year-to-date with previous years. The Parnell administration will not release this data to Alaskans. Why is this?

It cannot be overstated that ACES was written for us by the global consulting firm of Gaffney-Cline (division of Baker-Hughes). And that they built ACES to:

• Include Alaska in times of windfall profits (done);

• Create incentives for the leaseholders to explore, drill and produce into the future through generous investment credits, taking them out of "harvest mode" (done, ongoing);

• Maintain or increase daily output (ongoing. Long-term effect of the above points).

Legislators have asked to revisit with this firm, Gaffney-Cline, for their insight into how it has worked. This governor won't let Alaskans talk to them. He won't permit us to review and follow up with our own oil consultants. And no explanation is given for that refusal.

Alaskans are being asked to decide on an issue with enormous and far-reaching consequences. Vital and relevant information is being withheld from us. That's reason enough by itself to reject so-called "oil tax reform," and vote yes on Ballot Measure 1.

Peter Blanas is a lifelong Alaskan who, with his wife, Kim, lives and works in Anchorage. He's a longtime observer of Alaska politics and its relationship to oil and gas, and is a registered nonpartisan.

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(at)

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