Opinion: Fair share for our oil will help fix Alaska’s self-inflicted deficit

Opinion: Fair share for our oil will help fix Alaska’s self-inflicted deficit

Gov. Mike Dunleavy has chosen the path of cold, self-inflicted harm.

  • By Les Gara
  • Monday, October 14, 2019 9:45pm
  • Opinion

Gov. Mike Dunleavy is wrong that you have to damage a needed Marine Highway, educational opportunity, and hit hard at seniors and the economy to pay a PFD. That’s a false choice. Responsible governing requires better than inflicting harm on people.

A recently filed voter initiative would end unjustified oil company tax breaks at a time Dunleavy is creating self-inflicted damage. His calculated decision to damage our state is unprecedented by a governor. Needed, fair revenue, and a recall of a governor doesn’t care people are leaving Alaska, are our only ways to protect what we value about our state in the short term.

It’s time people understood the hundreds of millions of dollars our current oil tax law is giving away, and taking away from our communities and neighbors. Policies that smartly encourage business are good. Ones that give away a publicly owned oil resource through unjustified tax breaks just harm Alaskans from the youngest to the eldest.

I refuse to go so far as some of my friends, and say one action will balance the state’s budget. Fair oil revenue will help a huge amount. We don’t have to decimate a Marine Highway coastal Alaskans and businesses rely on. We don’t have to damage the opportunity, job training and road to success good public schools and a high-quality university provides.

Fixing roughly $1 billion in oil revenue giveaways is a major, fair part of a plan to move this state forward again.

How weak is Alaska’s oil production tax? Here are a few measuring sticks.

ConocoPhillips, unlike other companies, is required by securities laws to reveal their Alaska profits. Their last annual report shows what we’re giving away. Between 2016-2018 it made $3.6 billion in profit under Alaska’s generous tax breaks. That’s more profit than they earned anywhere else in the world.

In that same period ConocoPhillips lost $2.8 billion in the Lower 48. All its Middle East and Asian operations together generated two-thirds less profits than ConocoPhillips earned in Alaska.

When pushing for their 2013 oil tax breaks, oil companies pointed to the Lower 48, where they lost money and pay billions more in royalties to landowners (20%-25% royalty payments in much of the Lower 48, compared to 12.5% royalties on most fields in Alaska) as a model. We don’t have to sell Alaska to the lowest bidder to be competitive.

Here’s another measure.

A 2018 state study concluded Alaska’s tax breaks will result in negative oil production tax revenue for Alaska’s biggest oil producers in valuable oil regions like NPR-A (and for the same reasons, in ANWR). The report explains that “negative Production Tax Revenues” on new fields are the result of rock bottom oil tax rates, and an expensive tax break. That break lets corporations avoid taxes by deducting their costs on new fields from their tax payments on their existing highly profitable fields. We’ll pay out more than we receive from these fields for roughly a decade.

To prevail, a voter initiative needs to be written to avoid misleading corporate campaign ads claiming it addresses too many issues. This initiative cleanly addresses the most glaring flaws in our oil tax laws. It restores much of the revenue we lose to various excessive tax credits and breaks.

The initiative carefully applies only to the three largest, most profitable fields in Alaska, and future very large fields. It leaves the debate on smaller, potentially less profitable fields for the public and Legislature.

Depending on the price of oil, this initiative would erase roughly $1 billion of our deficit. At higher prices, which bring higher corporate profits, the initiative lets us share in those profits with a slightly higher rate.

We don’t have to choose between supporting a vibrant state with quality schools, that treats seniors with dignity one hand, or a PFD on the other. It’s time to end Alaska’s self-inflicted deficit. Dunleavy is wrong to use that as a reason to harm jobs and opportunity. If he won’t consider solutions that don’t damage this state, the constitutional right to vote on an initiative allows us to do his job.

Les Gara served in the Alaska Legislature from 2003-2018, and has been a long time advocate for oil tax reforms. He lives in Anchorage. This originally appeared in the Juneau Empire.


• Les Gara served in the Alaska Legislature from 2003-2018, and has been a long time advocate for oil tax reforms. He lives in Anchorage.


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