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Oil’s broken promise: Alaska’s fair share

  • Author: Joe Paskvan
    | Opinion
  • Updated: November 20, 2019
  • Published November 20, 2019

FILE - This undated file photo shows the Trans-Alaska pipeline and pump station north of Fairbanks, Alaska. For decades, Alaska has had an uneasy reliance on oil, building budgets around its volatile boom-or-bust nature. When times were rough, prices always seemed to rebound, forestalling a day of reckoning some believe may finally have come. The situation has politicians weighing changes to the annual dividend paid to residents from earnings of the state's oil-wealth fund, the Alaska Permanent Fund. (AP Photo/Al Grillo, File)

Alaskans have been talking about Alaska’s financial crisis. We talk about many manifestations of crisis including the shutdown of ferries in Southeast Alaska, $135 million in proposed cuts to the university system, cuts to Alaska’s vulnerable senior citizens, the closing of Alaska’s Arts Council, cuts to rural public safety during a time when Alaska “leads” the nation in sexual assault, the coming cuts to K-12 education, and more cuts into the meat and bones of our way of life. The question to be asked is: What is the origin of Alaska’s financial crisis? The answer is: the passage of Senate Bill 21 in 2013.

The oil tax system set up by SB 21 is broken. In three of the five years (2014-2018) since its passage, Alaska has had a negative production tax. Yes, negative means that Alaska received no net revenue from its production tax and had to pay money for credits to the producers. Three of five years with negative production tax is proof SB 21 is broken. Alaska cannot survive when it must pay the producers to take Alaska’s oil.

Another factual foundation establishing SB 21 is destroying Alaska is revealed by looking at the four full years (2015, 2016, 2017 and 2018) since SB 21 passed. In those four years, the producers’ total, collective production taxes are more than $600 million in the negative after awarded credits are considered. This is more than the producers paid in total to the state for property taxes and corporate income taxes. In other words, the producers have not collectively paid taxes to the state since SB 21 passed.

In fact, the state is having to issue bonds — borrow money — to pay the remaining $840 million in awarded but still unpaid credits from 2017 and 2018. It is disturbing to hear the producers complain of taxes when they have not meaningfully paid taxes under SB 21.

SB 21 must be fixed. The Fair Share Act is the only solution to restore Alaska’s revenue stream by correcting the failed SB 21. Some wanted to give SB 21 a “try,” and we now know it is proven to not work. There is no doubt that producer money and power created SB 21, knowing once SB 21 passed, billions and billions of dollars would transfer to the producers. The Fair Share Act is a citizen initiative that will give all Alaska voters the opportunity to correct the inequity and to return Alaska to its fair share of the wealth created from the sale of Alaska’s oil resources.

What is fair when it comes to Alaska’s fair share? Former Gov. Jay Hammond stated the original agreement was one-third of oil revenues is Alaska’s fair share. About 15 years ago, Gov. Hammond assessed the then roughly 27% Alaska received and determined Alaska was “shortchanged hundreds of millions of dollars” as compared to the one-third which was “once agreed to be our fair share.” Alaska’s current fair share should be one-third of the revenue from the sale of Alaska’s oil. The Fair Share Act may be judged upon whether it moves Alaska closer to the original agreement; it does.

Alaskans should be interested in and asking what percentage of revenue does Alaska receive under SB 21 for the sale of Alaska’s oil. Under SB 21 Alaska is receiving less than 20% of oil revenues. If Alaska was “shortchanged” at 27% of oil revenue, what stronger descriptive word than “shortchanged” should be used when Alaska receives less than 20% from the sale of Alaska’s oil?

The Fair Share Act does not apply to the small and new fields where investments are occurring. The citizen’s initiative would bring in about $1 billion per year and only applies to Prudhoe Bay, Kuparuk and Alpine, Alaska’s legacy fields. Additionally, a summer 2019 Alaska Journal of Commerce article compared 2019 to 1977, stating the “last time North Slope wells pumped that little (499,103 barrels per day) was 1977, when oil first started flowing …” So much for SB 21 advocates’ promise before passage of 1,000,000 barrels per day. Producer apologists also now whine about Alaska’s economy should the Fair Share Act pass. But they know that producer employment dropped by 5,000 jobs since the passage of SB 21. Watch out for the producers’ and their surrogates’ next seductive deceit.

Alaska’s financial losses under SB 21 are now measured in billions of dollars, as much as $2 billion per year, not just “hundreds of millions.” Please join me and many others by adding your signature to get the Fair Share Act on the ballot.

The Fair Share Act moves Alaska toward the original one-third of oil revenue to Alaska agreement. Together we will move Alaska toward Gov. Hammond’s original deal with Alaskans getting a one-third “fair share” from the sale of their oil.

Joe Paskvan is a retired former state senator and chair of the Senate Resources Committee. He was born and raised in Fairbanks, where he still lives.

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