The leading forces on both sides of a proposed oil tax increase have long squared off in courtrooms and administrative hearings.
Now, Alaska’s major oil companies and the oil and gas lawyer who has opposed them are fighting for voters on Nov. 3.
Robin Brena chairs Vote Yes For Alaska’s Fair Share, the initiative group that seeks to amend the current Alaska tax law known as Senate Bill 21.
The initiative’s opponents are pushing back hard, saying they have Alaska’s businesses, families and economy in mind. ConocoPhillips, ExxonMobil and Hilcorp Alaska have donated most of the $17 million raised by the initiative opposition groups, OneAlaska-Vote No on One, and the Alaska Chamber, as of late September.
The two-page measure, also known as Ballot Measure 1, would boost production taxes on ConocoPhillips, ExxonMobil and Hilcorp, which are Alaska’s three largest oil producers.
Brena, who will happily delve into tax-policy details with anyone who will listen, is the largest contributor to the Vote Yes initiative group.
He’s provided most of the $1.1 million the group had collected as of late September, with several hundred Alaskans pitching in the rest, he said.
Production taxes have fallen to historically low levels under Senate Bill 21, helping oil companies do well in recent years, while Alaska has cut services, Brena said.
Brena said he has nothing against big oil, and has sometimes been aligned with the state’s large oil companies, depending on the issue.
But he’s long represented independent producers, refiners, drilling companies and municipalities to win them a fair shake against the large companies and the state, he said.
“I’m just an Alaskan who loves Alaska and doesn’t want to see it being taken advantage of in this way,” said Brena, originally from Skagway in Southeast Alaska. “I mean, this is my home. I’m not here for a three-year stint to work for a major oil company. This is my home.”
OneAlaska has led opposition after collecting more than $15 million. The group’s leadership consists of Bill Popp, head of the Anchorage Economic Development Corp., Chantal Walsh, former state oil and gas division director under Gov. Bill Walker, along with small business owners, a union leader, a Native corporation chair and others.
The ballot measure targets the three top oil producers because it would raise taxes at Prudhoe Bay, which the companies jointly own, and the Kuparuk and Colville river units owned by ConocoPhillips. The units are the three largest in Alaska.
BP, which hopes to complete the sale of its pipeline assets to Hilcorp this year, has also contributed more than $4 million to OneAlaska. The oil company is supporting its industry peers, a BP spokeswoman said.
Do ‘the citizens of Alaska want us to start back up again or not?’
Joe Marushack, president of ConocoPhillips Alaska, says higher taxes will hurt the company’s cash flow and its ability to invest in valuable new projects in the three large fields and in newer fields. The projects could support thousands of jobs.
ConocoPhillips is the largest oil producer in Alaska.
Following the collapse in oil prices during the COVID-19 pandemic this spring, ConocoPhillips has reported losing $1.5 billion worldwide through June this year, including $60 million in Alaska.
The company has halted North Slope drilling for now, Marushack said. The industry has shed close to 2,000 jobs in Alaska this year, approaching 20% of the oil and gas workforce, state records show.
“So that’s very traumatic,” he said. “That really bothers me a lot.”
ConocoPhillips is making plans to fire up the silenced drilling rigs, he said. But the ballot measure is so extreme it could hurt that effort, prolonging the economic harm to Alaska, he said.
If the measure passes, regular operations would continue at the Prudhoe, Kuparuk and Colville units. But drilling next year would likely resume at only one project, at the Greater Mooses Tooth 2 field, Marushack said. Projects such as the large Willow discovery will likely be delayed.
“I can’t tell you what a difficult statement that is for me to make, because I know when that happens it affects all our contractors. It affects our suppliers, it affects our employees. Ultimately it will affect the state,” Marushack said in a presentation to the Alaska Chamber in September.
If oil rises to $60 a barrel, up from around $40 recently, the production tax increase represents a 300% hike to production taxes, Marushack said in an interview.
Do “the citizens of Alaska want us to start back up again or not?” he said.
If the Fair Share measure had been in effect from 2015 through 2019, it would have earned the state $1.1 billion extra a year on average, the Vote Yes group says.
The industry paid the state $400 million a year during that period, on average, under Senate Bill 21.
Under today’s low oil prices, the Fair Share measure would bring in less.
Ballot Measure 1, in addition to other limits, would also force the three top producers to disclose their tax records and supporting documents for Prudhoe, Kuparuk and Colville, opening them up for public review. The tax records are currently confidential.
Roots of the initiative
ConocoPhillips, the state’s largest producer, reported earning $1.5 billion in Alaska last year.
It also reported spending $1.5 billion on capital projects in Alaska for the year, including in pursuit of the large Willow discovery.
Brena has said the Fair Share Act will not impact development at Willow, because the measure applies to the three major units. He doesn’t think development at Willow will be deferred in part because it’s so valuable, he said.
The opposition counters that there will be delays at new projects because under Ballot Measure 1, the three oil producers would lose the opportunity to deduct exploration and development costs at projects such as Willow from their taxes at the Prudhoe, Kuparuk and Colville units.
Brena said ConocoPhillips in recent years has boosted its dividend, paid down billions of dollars in debt and has been spending billions of dollars buying back its stock.
“They are anything but capital-constrained" and can afford to pay for new projects in Alaska, he said.
Brena has won major disputes against the large oil companies, including when the trans-Alaska pipeline owners, BP, ConocoPhillips and ExxonMobil, set the pipeline’s value at $850 million, far lower than the $10 billion upheld by the Alaska Supreme Court in 2014. The decision was a victory for the municipalities that collect higher property taxes from the higher value.
Brena said he was a key drafter of the Fair Share proposal, along with Ken Alper, the state’s previous tax director under Walker.
Brena said last year he worked with about 15 other people who modeled and analyzed versions of the proposal for about six months. Many have held leading roles in state government or the Legislature, he said.
He declined to provide their names.
He worked with the group “with the expectation that their confidentiality would be maintained,” Brena said.
Alper said he was a consultant to Brena last spring and summer, analyzing the measure’s impact on production taxes.
Alper said he hopes the initiative passes, because Senate Bill 21 “leaves a fair amount of money on the table."
“Ballot Measure 1 isn’t a perfect bill,” Alper said in an emailed statement. “It will be complicated to administer, and it has a couple of ambiguities mostly due to its brevity. But it’s an improvement over our current system.”
When Senate Bill 21 passed in 2013, its impact at sustained low oil prices was not well understood, Alper said. It turned out that one key problem is the $8-per-barrel tax deduction, a late addition to the bill, that sharply reduces state income, he said.
The Fair Share proposal would bring production taxes back to historical levels, “in line, percentage-wise, with what Alaska received in the past,” he said.
Alper said, “If the initiative passes, I believe it will spur the Legislature to come back and pass a clean-up bill that both clears up the ambiguities (in Ballot Measure 1) and hopefully implements a fair middle-way tax that can meet everyone’s needs for years to come.”
Popp, a co-chair of OneAlaska and president of the Anchorage Economic Development Corp., said boosting taxes on the oil industry is an especially bad idea now, amid the pandemic and the resulting economic downturn.
Popp said he began publicly speaking out against the proposal last year, before OneAlaska formed and invited him to join.
“Now is not the time to put a huge tax on one of our key industries,” he said.
The overall value of Alaska’s oil is no longer what it once was, in part because so much has already been produced, he said.
Instead of turning to the oil industry for more revenue as it has often done, the state needs to diversify its income and may need to make additional cuts, Popp said.
“We should balance our books that way, instead of trying to go for an easy-button solution that is fraught with peril,” he said. “There is no longer the magic money tree we had out there for the past 30 years.”
Brena said the $1.1 billion annually the measure could raise would support many thousands of high-paying jobs outside the oil industry.