Alaska News

Deadline looming, Alaska oil tax repeal petition gains momentum

In the wake of announcements by BP and other oil majors of large investments in Alaska, opponents of Senate Bill 21 that cuts Alaska's oil taxes are racing to gather signatures for a repeal referendum. The bill's supporters, meanwhile, are mobilizing to keep the new tax system in place.

If SB 21's opponents can collect 30,169 signatures, equivalent to 10 percent of voter turnout in the 2012 general election, by the July 13 deadline, as well as fulfill geographic requirements, the referendum will appear on the August 2014 primary ballot. SB 21 is set to take effect this coming January.

Pat Lavin, coordinator of Vote Yes! Repeal the Giveaway, was cautiously optimistic his group would gather enough signatures. He estimated that volunteers from around the state had gathered around 20,000 signatures so far.

Lavin was also confident that geographic requirements for a successful petition would be met, too. State regulations for referenda require signatures from 7 percent of voters in the previous general election in 30 out of Alaska's 40 election districts, and the petition's organizers have distributed signature books throughout the state. Ray Metcalfe, former state representative and also involved in the repeal movement, thought differently from Lavin, and saw meeting the district requirements as the more onerous challenge facing their effort.

State Rep. Les Gara, D-Anchorage, who has helped collect signatures for the petition in Anchorage, said the effort was "on pace, very close."

On Monday, June 3, BP said it planned $1 billion in Alaska investments over the next five years in the wake of the oil-tax cut. ConocoPhillips and Repsol have also announced the new tax code will allow them to increase production. Gara admonished the oil companies for "spinning (the news) like a top" by presenting previously planned investments as fresh responses to the passing of SB 21.

Last Monday, BP Alaska President Janet Weiss acknowledged that some of the increased spending would have eventually happened anyway, irrespective of the just-passed tax cut.

Under the Palin-era ACES tax regime that has delivered billions to Alaska's coffers, oil producers pay a base rate of 25 percent on the first $30 of net profits from a barrel of oil, plus a 0.4 percentage point rise in tax rate for each additional $1 in profit per barrel.

When SB 21 takes effect on Jan. 1, producers like BP and ConocoPhillips will pay a base rate of 35 percent, but the progressive add-on to match the market price of oil will be eliminated. Along with a $5 per barrel exemption and other incentives, some estimates have placed the effective tax rate closer to 14 percent.

If the petition's organizers manage to gather the needed signatures by July 13, they will face what Lavin called an "uphill" battle before election day to counter oil-industry spending. According to Vote Yes! Repeal the Giveaway 's website, the petitioners have raised $55,000 in donations. Still, Lavin and Metcalfe thought a referendum would have a good chance of passing. "Based on public sentiment -- yes" was Lavin's analysis of a vote next August. Metcalfe was more explicit about the role of money in the repeal effort -- he said, "I don't think any amount of advertising can change the public's mind."

The opposition to the petition is being led by "We Are Alaska," an organization funded entirely by the Alaska Support Industry Alliance. "We Are Alaska" filed with the Alaska Public Offices Commission to participate in campaigning against a referendum. The group had spent about $30,000 by late May, mostly on radio ads, and will continue its public education campaign on SD 21 until the July 13 deadline, according to the group's director Rebecca Logan.

Logan said she expects the petition to reach the required number of signatures in time, given that its organizers have been "pretty active," as she put it. At the same time, she underlined the importance of keeping SB 21 in place.

"We've been able to enjoy a luxurious lifestyle in Alaska, and the decline in [oil] production threatens it," Logan said. She added that the We Are Alaska and the energy support industry share "the same interest" as the sponsors of the petition -- increased oil production -- but disagree over how to achieve this. For Logan, the priority is to incentivize the oil industry to ramp up investment and increase production now.

In response to the arguments put forward by SB 21's opponents, she took issue in particular with the claim that the tax credit will deplete the state's budget.

Opponents of SB 21 such as Gara labeled the incoming tax code a "loser's game" for Alaska that would deprive the state of billions of dollars in revenue that are needed for vital public spending.

"This implies we aren't facing that issue already…. we are. We are already facing a $750 million -- $1 billion dollar shortage," said Logan. And a referendum next August, Logan claimed, would lead to "nine months of instability" that will only hold up important investment decisions by the oil industry.

Logan's comments follow a similar argument made by Gov. Parnell last week in Juneau. Speaking to the Juneau World Affairs Council, Parnell said that "with declining production the riskiest course for Alaska would have been to keep taxing higher than almost anywhere in the world."

Outside the Barnes and Noble in Midtown Anchorage, Bill Buchwald, a member of Repeal the Giveaway, solicits signatures every afternoon. He's paid $1 per signature to collect them. Many members of the team are volunteers, including 15 in Midtown Anchorage and 28 in Fairbanks alone, according to Buchwald. Metcalfe thought that roughly 90 percent of the group worked unpaid.

Buchwald reported that his team were "a little behind" on gathering signatures recently, but said that nicer weather would make it easier to collect more signatures in the coming days, and hopefully make it to the required count in time. He also said that the public had in general displayed a "really good positive reaction" to his group's stance.

Repealing state law by referendum is rare in Alaska. Only three times in state history has such a measure reached the ballot box.

Most recently, the Land and Shoot referendum appeared on the ballot in 2000, and 53 percent of voters struck down legislation that would allow hunters to land airplanes and shoot wolves the same day.