Please join me in voting “no” on Ballot Measure 1. The so-called “fair share act” seeks to reconfigure Alaska’s oil and gas tax structure by amending the current regime established by Senate Bill 21, or the More Alaska Production Act.
This regime is working. Established in 2013, MAPA is structured to take less from oil producers when oil prices are high, and more from producers when prices are low. This balances the interests of the state with the interests of the producers: a global recession that results in plummeting oil prices doesn’t necessarily cripple the state’s budget, and lower taxes when prices are high and the economy is booming means producers view Alaska as competitive and are rewarded at the margin for actually producing oil. MAPA also creates credits for smaller producers that encourage exploration and which effectively make it less expensive for them to get each new barrel of oil out of the ground; it does not give these credits to larger producers like ConocoPhillips or BP.
By balancing public interest with the realities of the global marketplace within which the oil companies are working, MAPA has kept the industry interested in Alaska, maintained our competitiveness for production-increasing investment dollars, and increased the industry’s overall production. This balance is vital. Though Alaska doesn’t rely as heavily on oil as it once did, it is still the largest source of unrestricted revenue for the state. According to the Resource Development Council, oil generated $2.7 billion in revenue for Alaska in fiscal year 2019 or approximately 90% of the tax revenue from business. The regressive nature and higher minimum floor of the current tax structure also ensures that in low price climates, the state earns more than it would have under the previous tax regime, ACES; in fact, through FY19, $1.5 billion more was earned by the state under MAPA (RDC).
Yes, that’s right: the state is earning more money and producers are producing more oil under MAPA. So why the desire to modify things? And why now, in the middle of a pandemic and unprecedented economic uncertainty?
Proponents of Ballot Measure 1 assert that these modifications will net more money for the state. They will — in the short term. The measure will increase taxes on oil fields located above 68 degrees north latitude, that have a lifetime output of at least 400 million barrels of oil, and which had an output of at least 40,000 barrels per day in the preceding calendar year. Only three companies own fields that qualify for this tax! Three! This measure would temporarily increase the state’s revenues from the oil and gas industry by jacking the tax rate up so high on these specific fields that, according to analysts at S&P Global Platts, effectively 100% of the profits on new investments made there would go to the state. Why, then, would a company continue to invest on the North Slope?
Proponents also suggest that this gives the state its “fair share” and balances tax credits that are often perceived as industry giveaways. The only problem with this argument is that the tax credits established by MAPA have already been rescinded and targeted an entirely different group of producers anyway! This measure has nothing to do with tax credits and is in fact a money grab directed at specific companies. Why are nonsensical political arguments like this being used to persuade voters? Are the facts perhaps not enough?
The fact is, the industry is a massive player in the Alaska economy; in 2018, the industry accounted for more than 77,600 direct and indirect jobs and $4.8 billion in Alaska wages (RDC). Being the largest unrestricted revenue source for the state, a healthy industry ensures that we continue to have the inputs needed to support our marine highway system, public education, and a healthy Alaska Permanent Fund corpus. The modifications proposed by Ballot Measure 1 will not grow and support the health the industry but rather will spell a reversal to the production increases realized since 2013 under MAPA; the proposed changes will disincentivize growth, kill jobs, and decrease the state of Alaska’s overall earnings from oil and gas in the long run.
I am a proud lifelong Alaskan and registered nonpartisan. I care deeply about the future of our state and want to see us collectively take actions that benefit everyone for the long-term. Ballot measure 1 doesn’t do this. When you vote, please join me in setting aside politics and maybe even your feelings about the oil and gas industry or fossil fuels in general. We must vote in a way that makes economic sense and that will continue to allow our state government to function properly and in service to Alaskans. We have an existing tax structure that works and that has been working. We do not live in a perfect world; we do need to find solutions to our state’s budget crisis and stabilize the Alaska economy. Targeting a few businesses in one industry and overlooking the fact that we need major economic diversification, significant public infrastructure development, and increased value-added manufacturing to move the needle is short-sighted and bad policy.
Don’t put the cart before the horse, Alaska. Join me in voting “no” on Ballot Measure 1.
Chelsea Goucher is a former president of the Greater Ketchikan Chamber of Commerce, and currently is an account manager with Alaska Marine Lines.