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Again Alaskans need to set a sovereign tone for negotiating with industry

  • Author: Frank Gerjevic
  • Updated: May 31, 2016
  • Published August 16, 2014

We should see through the smoke and fear and vote yes Tuesday to repeal Senate Bill 21, the oil tax cut legislation. With that vote we'll return to ACES, the previous tax regime. And that will set the stage for improving ACES in the next legislative session.

Here's why:

We're a sovereign state, not a supplicant. This referendum is about a specific bill, but also about power. The oil companies not only want to pay the least amount in taxes, they want maximum freedom to invest those gains on their own terms, with the least obligation to Alaska. That serves the companies, not us. It's absurd state policy to give breaks on faith.

We have time. Those apocalyptic predictions of lights out in Alaska if we vote for repeal are nonsense. The companies may sell assets, as BP has done, but they're not about to walk away from billions a year in profit. By SB 21 backers' own arguments, the companies do better under ACES at current prices. So if we vote to repeal, the companies lose nothing while lawmakers craft a tax regime that still provides healthy profit to the industry -- but not at the expense of their constitutional obligation to Alaskans.

Common sense is instructive. The industry is going all out to defeat repeal. They're not doing so to break even with ACES. The producers already make hundreds of millions in profit every quarter from our declining oil patch -- they did so under ACES. Their aim is to make hundreds of millions more even if they never drill another well.

That's why they've spent millions to lobby in Juneau and dominate the current campaign - with a modest investment of millions, they secure a return of hundreds of millions. SB 21 gives them the prize -- most of progressivity is dead, and when oil prices do rise again, the producers will clean up. Even better, they reassert the power of industry to call the shots in Alaska.

Trust. With regard to the oil companies, too many of our current leaders don't measure up to Ronald Reagan's old axiom of "trust but verify." They go long on trust and short on verify. Our history with the companies suggests that trust is a fool's excuse for not doing due diligence. Many of us know people who work in the industry whom we trust. But we're not talking about individuals here, we're talking about corporations with their own agendas.

With the Parnell administration and the majority in the Legislature, trust has taken a beating. House Bill 77, the demise of the coastal zone management program, the state's actions on Pebble, the weakening of the cruise ship initiative's taxes and pollution standards, stacked appointments to boards and commissions all testify to the service of corporate interests before Alaska's common good.

On the question of oil taxes, Parnell's policy appears to have been to ask the companies what they want and then give it to them. Only the resistance of the Senate's bipartisan majority in 2011 and 2012 and a growing grass-roots skepticism forced Parnell and the majority to modify terms and cede less. And there's uncertainty about even that, which leads to my next point.

Doubt. When is a 35 percent base rate not a 35 percent base rate? When it's the base rate in SB 21. The effective rate is far less, 27 percent according to economist Scott Goldsmith, and the 35 percent rate only kicks in at oil prices we've never seen. Recently, Alaska voters have been told of rates on "new" oil (from fields dating to 2003) that may be as low as 13 percent, and that we could even lose money on some production with a tax that doesn't make up for up-front credits. How does all this work out? Alaskans don't know, and that's another reason to vote for repeal.

In his book "Crisis in the Commons: The Alaska Solution," the late Wally Hickel wrote about how he, as governor, intended to deal with Exxon over a settlement from the Exxon Valdez spill. Unlike other governors, he said, he wasn't about to fly to Houston. Exxon's executives would come here, because Hickel wanted to "set the tone." He wasn't interested in a punitive settlement, and his attitude was always to be fair to the industry and encourage development.

But he was clear that he was in charge, and that he worked for the people of Alaska, and that the industry could leave any notion of condescension or power plays at the door.

It's time again to set the tone.

Frank Gerjevic is an opinion pages editor at Alaska Dispatch News.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)

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