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Two views: No deal on new oil tax scheme

Posted: April 12, 2013 - 12:04am

This editorial first appeared in the Anchorage Daily News:

The oil tax bill still has a major flaw:

Alaska gives, producers don’t

The message from oil company executives hasn’t changed. They like the notion that the Republican majority in the Legislature wants to turn billions of dollars of revenue into oil company profits. But they offer no commitments in return, just talk of a more competitive environment.

Until they’re willing to make such commitments, Gov. Sean Parnell and lawmakers should put the brakes on further consideration of Senate Bill 21.

BP’s Damian Bilbao called the oil tax bill a “game changer.” That tease had the governor tweeting. But all Bilbao offered in description of game change was a likelihood that Alaska would see “a shift in activity” — investments around equipment, maybe more drilling rigs, maybe just looking around for more drilling rigs.

We’re going to give up billions in revenue for that?

This is neither good business nor good government — and it’s not how a sovereign state operates.

Let’s think about what’s been going on before Senate and House committees. Lawmakers have repeatedly asked the major oil producers for something in return for billions in tax cuts. The answers have been consistent: delighted with the cuts, even though they don’t go far enough, but no commitments in return.

And yet majority lawmakers keep pushing various versions of the same bill, and the only certainty is that Alaska will give up billions in tax revenue.

The governor and the Legislature are going about this in the wrong way. This approach puts the major producers in the driver’s seat and makes Alaskans no more than hopeful passengers.

Why?

Two reasons are increasingly clear.

• Lack of leadership. There’s no Jay Hammond or Wally Hickel at the helm right now to make the clear, strong distinction between the interests of the industry and the interests of the state — even more, to make the distinction between the identity of Alaska and the oil industry. Yes, the governor and lawmakers have said they want a tax regime that is fair to Alaskans and boosts production. But without some commitment from the industry, what this bill does is serve the interests of the industry — then hope and expect that Alaska as a whole will benefit.

Alaskans with any history here know that neither Hammond nor Hickel would have even entertained such a deal.

• While some supporters of the governor’s approach have pleaded with the industry to give a commitment to Alaska, it’s clear that the governor and some key lawmakers have no interest in demanding such a commitment. They seem convinced — despite the industry’s own repeated statements that there’s no promise of a North Slope surge — that increased production will follow a tax cut like night follows day.

That’s not a deal. That’s not a policy. That’s not a negotiating position.

That’s wishful thinking.

Or maybe Gov. Parnell simply wants to cut state revenue. He’s said that’s one way to force spending cuts.

That’s like a family that’s been spending too freely sending its breadwinner to ask for a “meaningful” pay cut to impose fiscal discipline. If you’re a family or individual or state with a spending problem, you don’t gut your income. You start to spend and save more wisely.

If budget surpluses worry the governor, Alaska has a perfect place for them — the Permanent Fund, which earns dividends for every current Alaskan and is a treasure of commitment to future Alaskans.

As we’ve written before, ACES isn’t the last word in oil taxation. Alaska can and should offer incentives to the major producers to increase production, encourage smaller companies and slow or reverse our long decline. The governor should change his four principles for tax reform to four words: Produce more, profit more. We can stoke the private sector without acting like colonials.

Reward performance; don’t bet billions on vague promises.

Alaska shouldn’t change oil taxes without gaining value in return.

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