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Paul Jenkins: Returning to ACES will mean losing oil gains

  • Author: Paul Jenkins
  • Updated: June 29, 2016
  • Published August 17, 2014

With the hours ticking away until Tuesday's primary election, the half-truths, whoppers and statistics apparently conjured from thin air are swirling like tornadoes through the debate about whether to repeal oil tax reform and return to the failed Alaska's Clear and Equitable Share oil tax.

The balloting comes -- thankfully, in the eyes of many -- at the end of arguably the most confusing, bitter and hard-fought ballot contest in state history. More than just a ruckus over numbers, charts and graphs, it has been a donnybrook over a vision for Alaska. The unvarnished truth, unfortunately, bit the dust early in the effort to repeal.

Through it all, through the bumper-sticker malarkey, the chest-pounding, the often comical obfuscations, there was only one immutable truth: Returning to ACES would mean less North Slope oil production. Period.

There inarguably was less oil production in every year the punitive, confiscatory tax was on the books. Every one. If Alaskans return to the flawed levy, that again will become the uncomfortable truth. The more you tax something, after all, the less of it you get and ACES, well, it taxed to the point of being destructive.

The choice Tuesday, then, is easy. If you believe less oil production is what Alaska needs, vote yes to repeal oil tax reform. If you believe Alaska needs more oil production vote no. Simple.

ACES, the darling of those who slept through economics class, depends on sky-high oil prices -- prices unlikely again any time soon, if ever -- to pump money into state coffers. Worse, it handed more than $1 billion a year in tax breaks to the oil industry for capital projects having nothing to do with producing new oil.

The tax was so aggressive -- in the end, even Democrats agreed it should be fixed -- the oil industry invested elsewhere and trans-Alaska oil pipeline throughput dried up by 6 percent annually. State revenues plummeted by hundreds of millions of dollars in recent years and the future was iffy, with one economist suggesting that by 2023, if nothing changed, Alaska would be fiscally kaput.

Returning to ACES, which contributed to a 90 percent marginal tax rate, would not fix any of that. Why would anybody believe that is a good thing? Again, it is about vision.

Those who embrace ACES believe Alaska is about money and government. They believe -- despite prevailing, unremarkable oil prices and all predictions to the contrary -- that the tax magically will bring billions to state government. For programs they like. For spending they like. For projects they like. They are about the money. Right now. As much as they can get. For government; not you. Given the facts, they are dreadfully myopic -- and wrong.

If ACES is resurrected, the industry likely would react as before. Investment will go elsewhere. Oil production will slide. Revenues again will dry up and there will be less money, a lousy economy and fewer jobs. The economic pie will shrink.

Those seeking to retain Senate Bill 21, the oil tax reform in effect since January, take a longer view of the economy, jobs, growth and opportunity -- at growing Alaska's economic pie. State government is not their biggest concern, but they understand that increased production means more oil, which means more money for the treasury, and more for education, transportation and other government functions -- and for the private sector.

The good news is that SB 21 is working, with new North Slope efforts promising tens of thousands of barrels of additional oil in the pipeline. Projects are moving ahead. The decades-long decline in oil production has just about leveled off and the next big project -- the biggest in three decades -- is on the horizon, the Alaska LNG Project.

Many worry Tuesday's vote is the final, etched-in-concrete word on the issue. What happens, they fret, if voters retain SB 21 and the industry does not hold up its end, or oil prices unexpectedly shoot through the roof and the state gets shortchanged? That is why we have a Legislature. It can amend SB 21 to fix problems, recoup losses, and we move on.

We always have a way out, but the central fact remains: Returning to ACES would mean less North Slope oil production. Period.

Nothing good can come of that.

Paul Jenkins is editor of the, a division of Porcaro Communications, which is performing services for the Vote No on 1 anti-repeal effort. He has nothing to do with the campaign.

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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