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Oil taxes must be balanced, encourage new production

Posted: January 6, 2013 - 1:10am

As North Slope oil production declines, Alaskans’ opportunities diminish. Where once we measured Trans Alaska Pipeline System (TAPS) throughput in millions of barrels per day, this next year, North Slope production will average 538,000 barrels per day. In just three years, production has declined by 100,000 barrels per day. This means fewer job opportunities and less money for schools and public safety for Alaskans.

Turning around this decline will not happen overnight, and it will not be easy. It will take billions of dollars in new investment every year to stabilize production, and billions more if we want to increase throughput in TAPS. That means new capital spending by Alaska’s legacy producers, as well as by new entrants to the state.

From Houston to Wall Street — and around the globe — energy companies and investors know that below the ground, Alaska has few rivals. Where we run into trouble is above ground.

To encourage these companies to make new investments, my administration has tackled permitting issues, stepped up our marketing efforts, and attracted new companies to Alaska.

But for every company that comes to Alaska excited about the vast hydrocarbon resources remaining on the North Slope, many others simply turn and put their money elsewhere; they are creating growth and prosperity in places like Alberta, North Dakota and the North Sea. Alaska has dropped behind North Dakota in production and drifted below California this past fall.

Every company that has either come to Alaska, or walked away, cites our oil tax system as problematic, particularly the high government tax when oil prices are high like they’ve been these last few years.

I have been encouraged by the consensus that has emerged over the past year. Where two years ago, some legislators denied there was a problem, today there seems to be agreement that Alaska’s tax system is out of balance when prices are high, and that something needs to be done.

Evidence of this was seen at the end of the last legislative session, when legislators from both parties studied and acted on different pieces of tax reform.

Although we may disagree at times on the details of tax reform, most Alaskans agree that something needs to be done. By building on that consensus and focusing on the opportunity before us, I am convinced we can come together collaboratively and move Alaska forward this year.

That is why I directed my administration to develop a new proposal for tax reform that builds on the work of the Legislature and our administration over the past two years.

I have told my team that any tax reform proposal must adhere to the following principles: First, tax reform must be fair to Alaskans. Second, it must encourage new production. Third, it must be simple, so that it restores balance to the system. Fourth, it must be durable for the long term.

I am asking Alaskans to come together around these core principles and build on the emerging consensus that something needs to be done.

If we work with these guiding principles in mind, we can maximize the benefit of Alaskans’ oil for Alaskans. By doing so this year, we will bring new jobs and new investment, we will begin to reverse the decline, and ultimately, we can unlock Alaska’s vast opportunities for future generations of Alaskans.

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