State must diversify economy or be bound to fossil fuel prices

  • By Fairbanks Daily News-Miner
  • Monday, July 14, 2014 10:28pm
  • Opinion

During the past few months you’ve read a great deal about Ballot Measure 1 on these pages, and for the next month leading up to the primary election Aug. 19, you’ll continue to. The measure, which would repeal Gov. Sean Parnell’s recently-passed oil tax reforms, is hailed by supporters as a return to a fairer tax scheme. Opponents say that repealing the oil tax reforms would cripple the state’s economy and undo progress made in stemming the decline of oil production on the North Slope. The two sides disagree on nearly every major tenet of the measure’s effects.

They disagree about whether Gov. Parnell’s reforms constitute a “giveaway” to oil producers. They disagree about whether new development on the North Slope was planned before the passage of Senate Bill 21 or came in response to the bill. They disagree about whether shaking up the state’s oil tax structure again so soon after the passage of a new regime will make companies skittish about investing in the state. But there’s one thing both sides agree on: oil tax revenues are the lifeblood of Alaska’s economy. And that’s why when state leaders propose altering the mechanisms that bring in those revenues, the fight is so bitter, widespread and loud. Even small tweaks to the oil tax formula can have outsized effects on budgets for state-funded services like education, transportation and public safety.

Our state’s economic ship floats or sinks depending on the level of that oil and gas money — it comprises 92 percent of the state’s unrestricted revenues, and a third of the state’s jobs. Given that fact, it’s easy to understand the hue and cry when law changes are proposed that would affect that cash cow.

Before the discovery of oil on the North Slope, Alaska wasn’t nearly so rich a state. Even with a state income tax (which Gov. Jay Hammond ditched in 1980 after the oil ship had come in), state revenues were far lower than modern levels, as were state services and population. The billions of dollars in oil wealth that came to the state after crude began flowing down the pipeline gave the state freedom to lower the tax burden on its citizens and greatly expand infrastructure and services. But as is often the case in states where one industry dominates the economy, the things you own can start to own you. We now depend on that revenue at least as much as — and likely a great deal more than — the producers need the oil that remains on the North Slope to maintain their profits. It’s not a comfortable position for the state.

Whether or not Ballot Measure 1 passes in August, it’s a stipulated fact that the Prudhoe Bay oil patch — which provides the bulk of state oil and gas revenues — is a mature field. While Gov. Parnell’s oil tax reforms may provide a meaningful incentive for producers to develop more oil there, the end of the field’s useful life will come within the lifespan of many Alaskans alive today. Given the state’s revenue picture before the oil started flowing, that’s an existential threat to our state’s economy as it exists today, and a clear sign that we can’t depend on oil forever. Even a full-diameter natural gas line — the great white elephant that state leaders have chased since the trans-Alaska oil pipeline was under construction — wouldn’t provide the same kind of revenue that oil does.

That means Alaska has to work as hard as possible to develop and sustainably maintain the renewable resources that currently contribute to the state’s bottom line, such as fish and timber. And it needs to develop industries and sectors of the economy that can begin to shift the balance of state revenues away from their current domination by oil and gas. And in the meantime, we need to make choices that will give the state as much time as possible to make that transition, because it’s not likely to be simple to find a solution or easy to adopt it.

 

— Fairbanks Daily News-Miner,

July 13

 

More in Opinion

Tease
Opinion: Rural broadband is essential infrastructure

Broadband funding is available. The rest is up to Alaskans.

Nurse Sherra Pritchard gives Madyson Knudsen a bandage at the Kenai Public Health Center after the 10-year-old received her first COVID-19 vaccine on Friday, Nov. 5, 2021. (Camille Botello/Peninsula Clarion)
Alaska Voices: A mom’s and pediatrician’s perspective on COVID-19 vaccines for children

I want to see children and their parents who have yet to get vaccinated roll up their sleeves.

Larry Persily (Peninsula Clarion file)
Opinion: State defends its right to cut nonexistent taxes

This from a state that has no property tax on homes or businesses, only on the oil industry.

Gavel (Courtesy photo)
Opinion: The foolish men claiming self-defense

It’s not just misguided teenagers carrying guns who find themselves in trouble with the law.

Dr. Jay Butler, former chief medical officer for the State of Alaska, is seen in this undated photo. (Courtesy photo)
Alaska Voices: Feeling grateful this Thanksgiving for the COVID vaccines

The COVID vaccines remain our strongest tool in combating the pandemic and helping us return to our lives and the things we love and cherish.

A resident casts their vote in the regular municipal election Tuesday, Oct. 6, 2020 at the Kenai Peninsula Fairgrounds in Ninilchik, Alaska. (Photo by Megan Pacer/Homer News)
Voices of the Peninsula: All votes matter

In the beginning, only property-holding white men could vote.

Cristen San Roman. (Photo provided)
Point of View: Is management of Cook Inlet catered to special interest groups?

If these fish are so at risk, why is BOEM able to move forward with lease sale 258?

Homer Foundation
Point of View: Grateful for the hidden ‘good’

Gratitude: Noun The state of being grateful; thankfulness. The state or quality… Continue reading

Homer High School Principal Douglas Waclawski. (Photo provided)
Point of View: What is Homer High School about?

What I consider Homer High’s strength is that we are a place for learning.

UAA Chancellor Sean Parnell. (courtesy photo)
Alaska Voices: Invent your future at UAA

At UAA we’re providing the tools to help students of all ages and skills chart a new course forward.

A registered nurse prepares a COVID-19 vaccine at the pop-up clinic on the Spit on May 27. (Photo by Sarah Knapp/Homer News)
Alaska Voices: Vaccination is the still best protection from COVID-19

The Alaska State Medical Association encourages you to protect yourselves and your community from preventable illness by getting recommended vaccines.

(Ben Hohenstatt / Juneau Empire File)
The sad diminishment of Rep. Don Young

Young seems afraid to demand his party leader defend the dignity of the institution he loves.