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Use ACES profits for upkeep of aging pipeline

  • Author: Anna von Reitz
  • Updated: September 27, 2016
  • Published March 9, 2011

Gov. Parnell wants us to give back about $2 billion dollars per year in income from Alaska's Clear and Equitable Share, or ACES, tax plan. He claims that doing so will benefit Alaska in the long run, but offers no guarantees. Skeptics just shake their heads. The whole point of keeping the ACES money is to make sure that it is reinvested in Alaska, not Bolivia.

Alaska is probably the only oil-producing state on the planet that does not require heavy mandatory reinvestments in oil infrastructure as part of its oil sale contracts. Iraq just signed a three-year contract that requires the oil companies to invest $350 million per year, on schedule, without regard to oil prices.

The net result is that Alaska is at the back of the line for maintenance and investment money.

The trans-Alaska Pipeline System, or TAPS, has not been kept ahead of corrosion or modernized and improved to be viable for the next 50 years. TAPS has been neglected and run on an "operate to fail" basis since 2007. If it fails, the oil companies can go elsewhere.

We don't have that option.

So here's the compromise on ACES -- we agree to spend the windfall profits on oil and gas infrastructure that supports the oil industry in Alaska.

We cut a deal to acquire a 12 percent ownership share in the oil pipeline, and we spend ACES money to rebuild, repair and modernize it. Our state share in the pipeline guarantees that at least that percentage of throughput can be allocated to production from smaller oil companies like Anadarko and Pioneer.

The major oil companies wiggle out of a 12 percent share of the pipeline liabilities and get TAPS rebuilt and modernized, thus relieving them of operating costs and encouraging them to continue drilling for new oil.

We Alaskans can rest assured that the oil money is being reinvested in Alaska.

Everyone goes home happy at the end of the day.

When we've bulwarked TAPS and are satisfied that it is back to standard and set to operate well into the future, we can continue to invest ACES money in projects that benefit both Alaska and the oil industry, building up our future instead of watching it drain away.

This plan or something like it should be acceptable to the oil companies and to the people of Alaska, too. Using the ACES tax structure to secure reinvestment money is actually easier on the oil companies than the unilateral contract obligations used elsewhere, because the amount of reinvestment in Alaska is tied to the price of oil. During boom times we automatically reinvest more, and during hard times the oil companies are not burdened by inflexible obligations. This arrangement should serve to make Alaska relatively attractive for new investment. Over time, ACES money used in this manner will mean a more cooperative public-private partnership with the oil companies and a state of the art oil and gas infrastructure for our state -- something that our resources deserve and require.

There is, therefore, no reason to overhaul ACES, only a need to clearly define the purpose of the income generated, so that our future well-being is assured at the same time our oil companies benefit from solid infrastructure improvements.

Gov. Parnell, members of the Alaska Legislature, Alaska oil companies -- lend me your ears. There are ways to protect and advance the best interests of all concerned. Let's do it.

Anna von Reitz is a technology analyst and 30-year veteran of gas development efforts in Alaska. She is the author of "Alaska's Gas," a history and analysis of proposed projects, and current President of Gas for Alaskans, a grassroots organization she helped found in 2007.

By ANNA VON REITZ

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