Facts about the oil tax giveaway

Just days after his $1 billion-plus oil revenue rollback passed, the Governor, oil companies and their allies began to crank up their PR machine. They’re spinning their bill, SB 21, as the reason for development that, um, started years ago under ACES, the law SB 21 just replaced. Soon they’ll be touting SB 21 as the reason for other “new” things, like radio and space travel.


Here’s some reality about these projects.

But first, let’s not be naïve. Oil companies have a legal duty to maximize profits for shareholders, and as such, they will promote any tax break that lets them keep more money. And the Governor will claim credit for every drop of oil he can.

So, what is SB 21? The big giveaway in that bill was the elimination of Alaska’s windfall profits share. That’s a $1 - $2 billion rollback in Alaska’s oil revenue (assuming $110 - $130/barrel prices), which allowed a modestly increasing tax rate as companies earned windfall profits at very high oil prices. SB 21 lets companies spend that money Outside Alaska, anywhere Exxon, British Petroleum and Conoco want. In testimony they refused to commit to spending it here.

I and others attempted sensible changes to ACES that would have required new Alaska oil development to earn reasonable breaks. But Governor Parnell and all 39 GOP legislators except two (Senators Stevens and Stedman) chose a fiscal cliff-creating state revenue slash that will keep Alaska in deficit spending.

By 2021 it will require more than 100,000 barrels/day in new oil just to break even with ACES. That’s likely a low estimate by PFC Energy, a paid consultant that promoted SB 21 (it’s higher than another consultant pushing SB 21 estimated). We’d be better served by an objective analysis.

Now, what about that sudden new SB 21-related development?

Just nine days after SB 21 passed the Governor touted that “Repsol has found oil in three test wells drilled this winter.” He quoted a Repsol spokesman who expectedly stated SB 21 was a “critical factor in ensuring the development of this project.”

Fact Check: In 2011 under ACES, Repsol announced it would begin major investments in Alaska. Repsol said nothing then about the need for tax breaks beyond the significant investment incentives in ACES. Its March, 2011, press release stated, “The estimated minimum exposure for this investment ... amounts to $768 million. The start of exploratory work is scheduled for next winter.... The North Slope of Alaska is an especially promising area for Repsol as it has already shown to be oil rich and carries low exploratory risk.” The oil found this winter was intended in 2011 to be developed, with recognition that ACES was the law in Alaska.

Three days after SB 21 passed, Conoco claimed SB 21 would lead to development of an area next to its Alpine development, called Mooses Tooth.

Fact Check: In 2009 Conoco announced development at its Mooses and Bear Tooth units in NPR-A, under ACES. They did this in part under the threat that they’d lose these leases for not developing them (companies have a duty to develop leases or lose them). They began work in 2008 and again in 2012. Conoco bought leases to expand the Mooses Tooth Unit in 2008, promised drilling in both areas, and in 2012 “staked nine potential well locations in the Mooses and Bear Tooth units (2012 Anchorage Economic Development Corporation (AEDC) report). Companies move ahead with field development because they’ve calculated the chances of production are worth the risk.

Fact Check: Brooks Range Petroleum has been developing the “Mustang” field under ACES. They discovered oil in 2011, and the 2012 AEDC report noted they planned to “sanction this project” in 2012 with “first oil expected in 2014.” Suggestions that this field was developed because of SB 21 are inaccurate.

Expect more spin from those who want to keep SB 21’s massive tax breaks. And expect less revenue, continued education cuts, construction and other job losses, and big dips into Alaska’s billions in ACES-created savings.

Les Gara is a Democratic State Representative From Anchorage.


  • Switchboard: 907-586-3740
  • Circulation and Delivery: 907-586-3740
  • Newsroom Fax: 907-586-9097
  • Business Fax: 907-586-9097
  • Accounts Receivable: 907-523-2230
  • View the Staff Directory
  • or Send feedback






Net neutrality needed

U.S. Sen. Lisa Murkowski did the right thing when she voted recently to protect net neutrality; it is unfortunate U.S. Sen. Dan Sullivan did not.... Read more