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Alaska should reward production, not rhetoric: Shale technology, not lower taxes, drives N.D. boom

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Posted: Wednesday, October 31, 2012 11:51 pm | Updated: 11:52 am, Mon Jan 21, 2013.

FAIRBANKS — It’s our oil. It’s our responsibility to manage it for Alaskans’ maximum benefit. Alaska’s future depends on Alaskans getting a fair return on our resources.

For the past two years, the biggest policy debate in the state has been whether or not to give away $2 billion per year in oil revenue to spur more development on the North Slope. But that question misses the point. If we want more production on the Slope, then the question should be how best to incentivize that production, and there should be a direct link between any policy change and more oil in the pipeline.

But with all the focus on the governor’s giveaway, we’re not having those discussions. Instead, the governor insists on giving away $2 billion per year even though he cannot make a single credible link between his giveaway and increased production. It’s important that we keep focused on the real issues at hand and not get distracted by the drumbeat of misleading, distracting or unrelated facts.

For instance, it’s true the amount of oil going through the trans-Alaska oil pipeline is declining, but it’s not true that the decline has anything to do with taxes. Pipeline throughput has been in steady decline for more than 20 years regardless of what tax structure we’ve had, including when we had a near zero tax for most of the fields on the Slope.

It’s also true that other states are seeing increased production, but it’s not true that it’s because of their tax structure or that it’s an all-or-nothing choice between producing Outside or in Alaska. In recent years, the oil industry advanced new technologies that enable them to tap large deposits of shale oil that were previously uneconomic to produce. This is driving the booms in Texas and North Dakota, despite North Dakota having the highest oil taxes in the Lower 48. Right now, companies like Great Bear Petroleum and Royale are gearing up to develop an equal or possibly even greater shale resource in Alaska. 

Interestingly, a friend in the North Dakota Legislature tells me oil companies there threaten to move to Alaska if North Dakota doesn’t lower its oil taxes.

These are but two of the well-known yet largely ignored facts swept under the rug by those pushing the governor’s across-the-board giveaway. Record exploration and employment on the Slope are others. Because Alaska’s future depends on responsible management of our oil resources, we cannot ignore the facts in hopes of a simple solution.

That’s why House Democrats and responsible members of the state Senate did their homework, asked tough questions and demanded real answers. That’s why, when confronted with the facts, the governor had to withdraw his latest misguided giveaway proposal, and even the strongest advocates of the governor’s giveaway have started to change their tune. Instead of continuing to beat the giveaway drum, they’re now saying the governor’s giveaway proposal wasn’t the answer and that they could be open to other ways to increase production.

Alaska Democrats have been there all along. That’s why we will not support a no-strings-attached giveaway with no ties to increased production. We welcome attention to our proposals to incentivize the development of new fields, reward more oil in the pipe and demand more Alaska hire on the Slope.

Each of our proposals is based on simple responsibility to Alaskans — to invest in our future, not give it away. Alaskans must have a clear and enforceable understanding of what we are getting for any reduction in our fair return for our resources.

As an owner state, we have the obligation to be responsible managers of our resources. The responsibility is too great, the consequences for Alaska’s future too high, for leaders to make multi-billion dollar decisions based on philosophy not facts. It’s time to push the giveaways aside and focus on the ideas that will actually get more oil in the pipeline, more Alaskans working and the maximum benefit to Alaskans from our resources.

Beth Kerttula is the House Democratic leader and represents Juneau in the Alaska state House of Representatives. She is a former Alaska assistant attorney general in the oil, gas and mining section.

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