Gov. Mike Dunleavy is wrong that you have to damage our university, schools and economy, and hit hard at seniors in order to pay a permanent fund dividend. That’s a false choice. Responsible governing requires better than inflicting harm on our neighbors.
A recently filed voter initiative would end unjustified oil company tax breaks at a time Gov. Dunleavy is imposing self-inflicted poverty. Needed and fair revenue, and possibly a recall of a governor who said he doesn’t care that people are leaving Alaska, are our only ways to protect what we value about our state in the short term.
We don’t need to take hacks at a university that trains an Alaska workforce or kill construction jobs (the state’s construction budget has been slashed during this self-inflicted deficit crisis) or harm local businesses. Fewer employees, fewer customers, and less grant money the university can draw from Outside means less money on the street to circulate through our economy.
It’s time people understood the hundreds of millions of dollars our current oil tax law is giving away every year and taking 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 endanger 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 fall behind on the opportunity and road to success a strong university and public education provide or on support our seniors deserve. Fixing roughly $1 billion in oil revenue giveaways is a major and 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 its Alaska profits. Its last annual report shows what we’re giving away. From 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 profit 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 would 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 the Arctic National Wildlife Refuge). 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 to 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, on one hand or a PFD on the other. It’s time to end Alaska’s self-inflicted deficit. Governor 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 has lived in Fairbanks and Anchorage since moving to Alaska in 1988. He served in the Legislature from 2003-2018.