On Dec. 10 and Dec. 17 there were outstanding presentations at the Fairbanks Economic Development Corp. weekly meetings on the status of our the present oil production tax structure since Senate Bill 21 was passed by our Legislature.
On Dec. 10, Robin Brena, longtime oil and gas attorney in Alaska and expert in oil financing, gave a presentation with lots of figures and facts on why the new Alaska Fair Share initiative is so important to the financial future of Alaska. You can see it, and should, on YouTube by searching “Alaska Fair Share.” It is one hour worth your time.
On Dec. 17, Kara Moriarty, president and CEO of the Alaska Oil and Gas Association, gave a presentation with lots of figures showing why they do not think a change in the tax structure would be good for Alaska. It can also be found on YouTube by searching “Alaska Fair Share.” You should do so.
In her presentation, Ms. Moriarty showed when the bottom dropped out of the per barrel price the oil companies did lose money under SB21. They were not expecting a drastic drop in the price of oil. As part of her presentation, she had two of the most successful and wealthy local oil support businesses lament on the loss of hire of employees, even under the SB21 present tax structure.
It seems the oil companies’ point was that reemployment of 100 to 200 more workers into oil support businesses would, if possible, be more beneficial even if the state of Alaska is losing over $1 billion a year in the process. Their drop in employment numbers has nothing to do with taxation but with the reduced production of the in-place legacy fields.
In their presentation, the AOGA comparison chart shows that since oil prices have risen the last two years, the SB21 law is giving the Alaska oil industry much more than $1 billion (one thousand million dollars) a year more — meaning that Alaska is losing that much — than it would under the previous ACES (Alaska’s Clear and Equitable Share) tax structure before SB21.
An additional $1 billion (one thousand million dollars) a year in state income would provide opportunities for local hire in a variety of other new businesses in this state and provide a state capital budget to employ Alaskans on important new construction projects.
After watching Ms. Moriarty’s presentation, please return to the one by Robin Brena and review.
It is worth a revisit to compare the two.
The late Gov. Jay Hammond believed Alaska should net one-third of the profit of our oil leaving the state. He attempted to work toward that figure. Former Gov. Sarah Palin got closer to “Alaska’s fair share” with over 30%. After that, SB 21 was passed in the Legislature and it was all downhill since then for the state of Alaska. We are now netting about each year $150 million or 1.5% of the $10 billion gross that the oil companies are taking in each year.
The Alaska oil industry does not like the idea of an initiative to show that the voters of Alaska want a better deal and that the Legislature should work on our behalf to get one. When SB 21 passed, one of our legislators said he would see how the state was doing in a couple years. It has been five years and the Legislature is not looking seriously at any change in the tax structure that is now putting over $1 billion (one thousand million dollars) in the oil industry’s coffers each year and not in Alaska’s.
Don Callahan is a nonpartisan lifelong Fairbanksan. He has a civil engineering degree from the University of Alaska Fairbanks and was a registered engineer and a licensed paramedic in Fairbanks.