Opinions

Step 1 in fixing Alaska’s budget crisis: Better oil revenue management

If there ever was a time to rethink the “light” hands-off coverage, by TV and radio stations, and newspapers, both public and private, relating to getting our legacy oil fiscal policies corrected to benefit both producers and Alaskans, it is now, with the special session next month.

Alaskans have a wonderful opportunity to continue the conversations we started with Alaska’s Fair Share Act. We need to remember the industry spent $25 million — more than has ever been spent opposing any state candidate or ballot initiative — to protect its shareholder or owner’s interests. It hired top-flight PR firms and flooded social media, TV, radio and other messaging outlets to explain why they preferred not to share a little more revenue with Alaskans. Knowing that publicity paid for by the industry, as buyers of our oil, is focused on the oil industry’s interests, not those of Alaskans, as sellers of oil, and to provide Alaskans with some balance against that $25 million, to help Alaskans understand their side of these issues, and for publicity about Ballot Measure 1′s issues, our Legislature allocated — zero dollars. Even then, more than 145,000 Alaskans, or 42% of those voting in the last election — during the pandemic — supported increasing revenues to the state by transparently increasing Alaskans’ share of production revenues from our legacy oil fields. And still, some legislators and others have the mendacity to ignore their own complicity in the outcome, by saying Alaskans don’t support increasing revenues to the state because “only 42%” voted yes for Ballot Measure 1′s changes — in 2020′s pandemic price crash year. Today, with the pandemic waning and oil prices increasing, more than half of Alaska voters would vote in favor of Ballot Measure 1′s adjustments. And, to be direct, Alaskans support increasing revenues from our oil far more than the alternatives being discussed in Juneau — reducing Permanent Fund dividends, passing an income tax or passing a statewide sales tax.

The Alaska’s Fair Share Initiative became Ballot Measure 1. Ballot Measure 1 tried to end barrel credits on just three legacy oil fields which Alaskans own in common; limit deductions to the costs of producing oil from these three legacy fields; increase production tax rates modestly to less than the average tax for the past three decades; and increase transparency so Alaskans would know how our legacy fields were performing. These were good concepts at $40 per barrel oil and are great concepts at $60 to $70 per barrel of oil.

Even Joe Marushack, recent former president of ConocoPhillips Alaska, told legislators, businesspeople and Alaskans last October 2020, when oil prices were close to $40, about what would happen if Ballot Measure 1 passed: It “would not effect” regular operations at these three legacy fields.

No legislator, Democrat or Republican, nor the governor, should continue to ignore the truths of Alaska oil production:

• Our three major fields are low-cost fields. The Department of Revenue reports the costs associated with producing oil from the Prudhoe Bay Unit, or PBU, and transporting it to the West Coast are $25-$28 per barrel.

• Decreasing our revenues from the PBU resulted in less capital being invested in the PBU, fewer jobs and less revenue to Alaska.

• Increasing our revenues from the PBU would result in no effect to the operation of the PBU and increased revenue to Alaska.

Despite these facts, Alaska is now getting less than half of the value of our oil compared with other major oil producing states — 12.5% in royalties compared with 25% for other states and 4% in production taxes compared with 10% for other states.

Legislators must be part of the solution here. But for more than six years, they have been the problem. Because they, for very strange reasons, seem to think it makes sense to join some sort of coalition and agree to hide things from Alaskan businesses, seniors, teachers, parents and average Alaskans, when it comes to having access to our legislative process to hold hearings and consider highly relevant data which would have helped restore some of the revenues we lost with SB 21. This hurts business interests. It hurts Alaska’s economy. It hurts our credit rating. Keeping Alaskans in the dark about these matters is bad for business. It is bad for teachers, parents and schools, too. Let your legislator know you will not be voting for them unless they increase transparency and production revenues from our oil this year. Our current fiscal policy is seven years old. And after seven years, Alaskans know the current system is not working.

Anyone in business requires transparency and fair pricing. In fact, the Alaska Constitution requires the Legislature to optimize the value of our resources. This constitutional duty may not be met without transparency. Pass legislation to allow Alaskans, their legislators and the governor to know how the state’s oil fields are actually performing. The time is long overdue for greater transparency.

Our legislators, and other groups falsely claiming to be impartial, have not even provided Alaskans one full day of public hearings about Ballot Measure 1. The people who have researched these issues are available and their ideas should be considered. They can be interviewed by reporters and legislators. The Alaska Fair Share website is still up, with all of the data explaining why Alaska needs to address these issues. So, when some legislator claims to be just shocked about the governor’s vetoes or the size of the PFD, just remind them to look in the closest mirror to locate the reasons for those circumstances. And ask them, “Why are you continuing to give our oil away to out of state companies for less than it is worth when Alaska is in crisis?”

We need better management of our oil wealth. We all share ownership of these legacy fields, which continue to produce billions of dollars of wealth annually. Managing how this wealth is shared is one of the most important responsibilities for Alaskans. Tell your legislators you are tired of their continual evasion, and that you want transparency and a fair price for our oil.

Just eliminating the per-barrel credits for Prudhoe Bay is the low-hanging fruit. No credible expert is telling the governor, legislators or the public that this should continue to be part of our PBU fiscal policy. Just the opposite. It should be eliminated for our three largest legacy oil fields.

David Carter is a retired attorney who lives in Anchorage. He was and remains a supporter of the Ballot Measure 1 changes, and he believes we need more transparency from our elected representatives and our government.

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