Ballot Measure 1 would amend the current production tax system, enacted through Senate Bill 21 (SB 21), to allow Alaskans to get a transparent and fair share of the revenues when oil is taken from our three largest and most profitable fields. SB 21 has been the largest oil resource giveaway in Alaska’s history, and, if you are an Alaskan, you should vote to amend it to be fair by voting Yes on Ballot Measure 1.
Major international oil companies based in Texas are spending millions to convince Alaskans to vote No on Ballot Measure 1, arguing we are better off taking less than a fair share from our major fields. They suggest they can do much better in the Lower 48, so we should just be thankful they are here taking our oil at all. Let’s have a closer look.
Two-thirds of the increased production revenues under Ballot Measure 1 will come from Alaska’s Prudhoe Bay Unit. Prudhoe Bay is one of the most profitable, conventional oil fields in the world. It can easily support paying Alaskans a fair share without impacting investment or jobs. For over four decades, our field at Prudhoe Bay has produced far more than expected while the price of oil has increased at double the rate of inflation. In 2018, for example, it produced a little more than 106 million barrels, which sold for $6.7 billion. After operating costs, capital costs, royalties and transportation costs, the producers made $3.7 billion in net income, or $39.70 per barrel. They are making a killing off of our Prudhoe Bay oil! But, because of SB 21, our share through production taxes of the $3.7 billion was only $230 million. This is called getting ripped off.
ConocoPhillips’ annual reports show the company is making more than twice as much per barrel Alaska-wide than in the Lower 48. The Legislative Research Service (LRS) has analyzed and compared ConocoPhillips’ earnings Alaska-wide with the Lower 48. In its most recent report, LRS Report 20.119 (Feb. 7, 2020), the LRS determined ConocoPhillips has made more than twice as much per barrel Alaska-wide as in the Lower 48 in every year it reviewed (2012-2019). In the first year after SB 21 passed (2014), for example, ConocoPhillips made $4.43 per barrel in the Lower 48 while it made $31.10 per barrel Alaska-wide or 602% more. This is called being taken to the cleaners.
[The other side: Complicated tax policy shouldn’t be decided at the ballot box]
Since SB 21, ConocoPhillips has made 68% of its worldwide profit from Alaska, but only invested 15% of its worldwide capital in Alaska. ConocoPhillips has raised dividends by 60% in the past two years and increased the authorization to repurchase its own stock from $10 to $25 billion in the past three months — while we have cut our Permanent Fund dividend substantially. Since SB21, ConocoPhillips has paid down almost $12 billion in debt — while we have spent $18 billion in our savings. This is called being ConocoPhillips’s cash cow.
Texans and North Dakotans are getting two to three times more for their oil than Alaskans. As a result, people opposed to Alaskans getting a fair share have been offering misleading comparisons to justify why we are getting so much less than other states. One recent commentator suggested Texas was a better place to do business than Alaska. Clearly, the actual performance of ConocoPhillips in the Lower 48 directly contradicts his suggestion. Moreover, even a cursory review of his misleading comparison between Alaska and Texas reveals significant errors. His comparison ignored the differences favorable to Alaska (our oil sells for more than Texas oil, for example), mischaracterized transportation profits as costs, included costs unrelated to production, and pulled out of thin air the costs of operating major fields in Texas. In fact, a recent survey of 26 Texas operators as well as the Dallas Fed’s Energy Survey of 200 oil and gas firms put the break-even costs for the major fields in Texas well above the break-even costs for Prudhoe Bay.
Ballot Measure 1 will help the overall economy of Alaska, a lot. Keeping $1.1 billion per year more of our oil wealth in Alaska is the economic equivalent of adding 11,000 new Alaska jobs at $100,000 per year — more jobs than are in the entire oil and gas industry in Alaska. While helping the overall economy, Ballot Measure 1 will not hurt investment or jobs in the oil industry, because it only applies to our largest and most profitable fields that can well afford to pay a fair share to Alaskans. In fact, production taxes under Ballot Measure 1 will actually work out to be less than the average production taxes for the three decades before SB 21.
Ballot Measure 1 will help save PFDs, avoid cuts to K-12 education, minimize taxes on Alaskans, and save and create thousands of Alaskan jobs. Ballot Measure 1 also provides for transparency, so every Alaskan will know the financial performance of our major fields. We should not allow Alaska to continue to be treated like a banana republic in the Third World. Alaskans should vote yes on Ballot Measure 1 and get a fair share from our major fields. This is called standing up for Alaska!
Robin Brena is a longtime oil and gas attorney who served as the chairman of the Oil and Gas Subcommittee for the Walker administration transition team. He is the chairman of Vote Yes for Alaska’s Fair Share, the group backing Ballot Measure 1 on the Nov. 2020 ballot.
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