I try to be easy on the person and hard on the problem. Alaska’s problem is Senate Bill 21, so I shall attempt to deal directly with it.
My recent Community Perspective in support of Ballot Measure 1, the Fair Share Act, elicited the stereotypical response from those who are trying to stay in the good graces of the big oil producers who are bankrolling more than 99% of the $10 million (so far) advertising effort to oppose Ballot Measure 1 and keep SB21 as is. These corporations consider it their responsibility to maximize profits so that paying any additional revenue to Alaska, regardless of fairness or reasonableness, is considered a threat, which they will fight by all means at their disposal. This means extensive use of surrogates to provide out-of-context and cherry-picked information. I encourage you to do your own research, including visiting Alaska’s Fair Share website and the state of Alaska Department of Revenue’s “Revenue Source Book” for information.
SB21 has failed to deliver on its promises. Under SB21, we have had years of decreased investment in the three major fields, lower production levels, net negative production revenue after credits, and extremely high producer profits. These facts are not in dispute. But Fair Share opponents seek to lead you away from the truth.
For example, the surrogates will argue that the base rate under SB21 is higher. While SB21 does have a 35% base rate, SB21’s system overwhelms that base rate. The base does not apply to oil’s market price but on a value calculated after many deductions. Most importantly, the base rate is further reduced by the $8 per barrel credit. The SB21 system reduces the base rate, by its deduction and credit structures, making SB21’s effective rate the lowest in state history.
SB21’s $8 per barrel credit explains the net negative $246.4 million loss to Alaska in 2015. Alaska oil prices started the year at $55, increased to $60, were $56 on July 4 and ended the year about $40. Alaska should be booming. The SB21 credit system sent Alaska’s production revenue into negative territory. Yes, oil prices were lower than 2014, but Alaska’s production revenue disproportionately disappeared. Disproportionate loss of revenue by Alaska is one reason why the Fair Share Act proposes changing SB21’s credit system.
At low or medium and even high oil prices, SB21 causes massive losses to Alaska.
Consider the risk to Alaska in the perspective presented by those who have a bias arising from their oil-connected job. They want to protect themselves, but we must consider the fate of all of our Alaska jobs. It is hard for one dependent upon an oil-connected job to not be self-interested and willing to cherry-pick data. SB21 is a massive subsidy of the oil industry and, therefore, a massive subsidy to each oil-connected job. Continuation of the credit subsidy to oil, which gives away billions, will eventually result in loss of all Alaska Permanent Fund dividends, the destruction of the permanent fund itself, and further massive cuts to the meat and bones of Alaska’s government. This reduces all Alaska jobs and keeps Alaska in recession.
Opponents of changing SB21 mention high oil prices and claim past Legislatures “burned through” all the cash. The obvious question not thought of is this: Where did $18 billion in savings in the Constitutional Budget Reserve and Statutory Budget Reserve, savings beyond the permanent fund itself, come from? The Bipartisan Working Group in the Alaska Senate went on a savings spree for all Alaskans.
Subsequent oil-controlled Legislatures burned through the $18 billion in those savings to hide from Alaskans the magnitude of devastation caused by SB21. Now that those savings are gone, those who created SB21’s devastation cry loudly for more budget cuts and/or imminent loss of PFDs for all Alaskans and/or income taxes upon Alaska’s citizens.
Alaska deserves better than what SB21 imposes: 1) Five years of net negative production revenue, 2) 5,000 lost oil and gas jobs and thousands of lost public and private jobs, 3) loss of 57,500 barrels per day through the Trans Alaska Pipeline System, 4) recent four years with the lowest industry investment, 5) cuts to every Alaskan’s PFDs, and 6) deep cuts into Alaska’s meat and bones.
Alaska faces an economic catastrophe caused by SB21. A future under SB21 will increase the harm to Alaska. Please give Alaska’s future a chance. Vote Yes on 1 to change SB21. Vote for Alaska’s Fair Share.
Joe Paskvan is retired after almost 40 years as an attorney in private practice. He is a former state senator who served as chairman of the Senate Resources Committee. He lives in Fairbanks.