Community Perspective

On oil taxes, Alaska is being ripped off

There is a single issue facing our state that ought to form a rallying cry as we head into this next election: We cannot continue to pay oil companies $8 per barrel to pump oil out of our state. This is an oil entitlement program that we can ill afford even in the best of circumstances. But to continue down this road with the fiscal issues we currently face is brazenly stupid.

Let’s do a quick recap of the 2013 plan of former Gov. Sean Parnell. The budget was to be capped, at roughly $6.8 billion, for five years. Additionally, we would fund a new oil entitlement program that would fund exploration and development in such an effective way that we would be pumping a million barrels per day through the pipeline with subsequent job, business and economic growth. How did that go? Let’s not judge the Parnell plan according to the critics of it. Let’s examine it by the promises made to Alaskans when it was implemented. How have we done?

To those of you who have businesses and jobs in the Alaska oil economy, how is the oil entitlement program helping you now? Have the oil companies agreed to maintain employment levels because of the generous state subsidies being paid to them? Have we seen the promised boom in oil development and production?

Consider that the 4% minimum tax rate on a barrel of oil, when the price is above $25 a barrel, is less than half of the rate we charge for bed tax in our borough. Let’s say that another way. Travelers laying their heads on a pillow are charged a tax rate more than twice as high as a company that is harvesting resources from our state. This is madness.

Now let me be clear, I am not against development of our natural resources. I think most of us are in favor of developing our resources in a way that is mutually beneficial to all parties involved. But the current oil entitlement program falls far short of that goal. Who among us would allow a gravel pit to be dug on our properties for 4% of the value of what is extracted? Now take that a step further, and who among us would pay a company $8 per load of gravel removed just to encourage faster digging?

We are paying generously to have our resources taken while we are being told there will be some future benefit that should appear on the horizon. In 2013 we were told it would take five years to see the benefits. How long should we trust the people who made that deal? How long do we wander onward expecting a different result from the same failed ideas?

Now, I own a small business and have worked closely with big corporations to negotiate deals and contracts. I have been — and remain — pro-business and pro-commerce. But I have never seen a deal as bad as the oil entitlement program. And it continues unabated while our state rapidly gathers momentum toward economic ruin.

People are losing their jobs. Businesses are closing. Population is declining. If we are a government of the people, by the people, and for the people, how long do we quietly acquiesce while our future is sold without reward?

As a business person, perhaps I am to blame. I have recognized this untenable oil entitlement for some time. But I have been reluctant to inject myself into a political environment that is hostile and subject to crazy extremes on both sides. I have largely kept my head down and attended to my business. I take care of my family, my employees, my stores. I have comforted myself that voting is sufficient. Plus, who wants to make their family or business a target? But I have to acknowledge it’s been more cowardice than caution. So I share in the blame for allowing the status quo to roll on while trying to stay safely on the sidelines. Now, there are no sidelines. And certainly the illusions of safety are rapidly disappearing.

It doesn’t take a politico or party pundit to tell us that we are on a dangerous course. We cannot continue with the same, lame policies. It doesn’t take an expert to realize Alaska is being ripped off. It’s time we put a stop to it.

Evan Eads lives in Fairbanks.

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