Seaton: Vote yes on Ballot Measure 1

  • By Paul Seaton
  • Thursday, August 14, 2014 5:00pm
  • Opinion

Why Vote YES on Ballot Measure 1?

There is only one chance to repeal SB 21. New laws can only be repealed at the first general election following passage. SB 21 is unfair to Alaskans. Passage of Ballot Measure One will default to the prior tax system, but a citizen ‘veto’ of SB21 does not create a new tax or prevent acceptable oil tax reform.

People have asked – What is unfair to Alaskans in the new tax law?

If you are an oil company with leases on the North Slope the bill guarantees that if you have a “net operating loss” the State will reimburse you for 45% of your loss through 2016 and 35% thereafter. All expenses of a company without production could be a loss attributable to the lease. If there is another price crash, our profit-tax might generate no revenue but we would owe 35% of every company’s loss. Wouldn’t Alaska small businesses like that kind of deal? Can’t believe it? Check the final House fiscal note http://www.legis.state.ak.us/PDF/28/F/SB0021-14-5-041213-REV-Y.PDF

Should Alaskans want less competition for our oil?

The unspoken agenda of SB 21 was “Basin Control”. Basin Control means an effective monopoly of an entire region where oil or gas occurs. This is possible on Alaska’s North Slope because of the high cost and long lead time of arctic projects. The real story is that the SB 21 tax/incentive structure was designed to give the Big Three oil producers the ability to control nearly all development on the North Slope. ACES incentivized investment in exploration which is why under ACES the number of North Slope oil companies more than doubled. The Big Three quit new exploration and gave up most exploration acreage in the last 15 years. Don’t believe it? Check Petroleum News volume 16 of May 2011. They wanted the incentive system shifted in their favor. SB 21 did that by changing to “rewarding production”, meaning reduced tax for the Big Three.

Can the State increase production simply with the SB 21 tax reduction?

SB 21 tries to change the corporate schedule of development in the big existing fields. However, a BP executive said they might not want to accelerate Prudhoe Bay output because they anticipate needing its light oil to mix with heavy oil when they perfect the technology for recovery of those massive reserves of heavy oil. They cannot pump heavy oil down the pipeline without significant light oil dilution. Reducing taxes does not override the physics of oil.

Will reducing taxes change the competitive strategies to secure new oil?

Multinational oil companies have a 50-year view to participate in many fields, so as some fields decline, new sources are secured. Our Big Three are currently investing in Norway, Russia, and other places that have higher government take (taxes, royalty and fees) than Alaska. Those decisions are based on access to new sources of oil regardless of the cost. It is competition for access to those future basins that drives investment. The same is true for North Dakota shale oil where they compete for every private landowner. The real competition is between companies to secure new supplies of oil, not between the tax rates of countries.

SB 21 takes away Alaskans’ windfall profits at spiking high prices and increases the State risk at low prices or high field costs.

You should ‘veto’ SB 21 because it creates huge State liability for operating losses, recreates basin control monopoly, gives tax breaks for existing production, and does NOT require additional production for the tax breaks.

I encourage a YES vote.

More in Opinion

This image available under the Creative Commons license shows the outline of the state of Alaska filled with the pattern of the state flag.
Opinion: Old models of development are not sustainable for Alaska

Sustainability means investing in keeping Alaska as healthy as possible.

Gov. Mike Dunleavy unveils proposals to offer public school teachers annual retention bonuses and enact policies restricting discussion of sex and gender in education during a news conference in Anchorage. (Screenshot)
Opinion: As a father and a grandfather, I believe the governor’s proposed laws are anti-family

Now, the discrimination sword is pointing to our gay and transgender friends and families.

Kenai Peninsula Education Association President Nathan Erfurth works in his office on Thursday, Oct. 28, 2021, in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Voices of the Peninsula: Now is the time to invest in Kenai Peninsula students

Parents, educators and community members addressed the potential budget cuts with a clear message.

Gov. Mike Dunleavy holds a press conference at the Capitol on Tuesday, April 9, 2019. (Juneau Empire file photo)
Opinion: An accurate portrayal of parental rights isn’t controversial

Affirming and defining parental rights is a matter of respect for the relationship between parent and child

t
Opinion: When the state values bigotry over the lives of queer kids

It has been a long, difficult week for queer and trans Alaskans like me.

Dr. Sarah Spencer. (Photo by Maureen Todd and courtesy of Dr. Sarah Spencer)
Voices of the Peninsula: Let’s bring opioid addiction treatment to the Alaskans who need it most

This incredibly effective and safe medication has the potential to dramatically increase access to treatment

Unsplash / Louis Velazquez
Opinion: Fish, family and freedom… from Big Oil

“Ultimate investment in the status quo” is not what I voted for.

An orphaned moose calf reared by the author is seen in 1970. (Stephen F. Stringham/courtesy photo)
Voices of the Peninsula: Maximizing moose productivity on the Kenai Peninsula

Maximum isn’t necessarily optimum, as cattle ranchers learned long ago.

(Ben Hohenstatt / Juneau Empire File)
Opinion: The time has come to stop Eastman’s willful and wanton damage

God in the Bible makes it clear that we are to care for the vulnerable among us.

Caribou graze on the greening tundra of the Arctic National Wildlife Refuge in northeast Alaska in June, 2001. (Michael Penn / Juneau Empire File)
Opinion: AIDEA’s $20 million-and-growing investment looks like a bad bet

Not producing in ANWR could probably generate a lot of money for Alaska.

A fisher holds a reel on the Kenai River near Soldotna on June 30, 2021. (Photo by Ashlyn O’Hara/Peninsula Clarion)
Voices of the Peninsula: King salmon closures long overdue

Returns have progressively gone downhill since the early run was closed in June 2012

(Clarise Larson / Juneau Empire File)
Opinion: Fixing legislative salaries and per diem

The state Senate was right to unanimously reject giving a 20% pay… Continue reading