My Turn: Open discussion needed on oil taxation

I appreciate vibrant discussion on public policy, but some are proposing revenue plans that notably ask citizens to pay and leaving Alaska’s three major oil companies, who profit handsomely even at low oil prices, out of plans to address our fiscal gap.


That’s a recipe for a public backlash.

It’s good to put everything on the table for people to debate so policymakers can listen. It’s wrong to write off receiving a fair share, or as the Alaska Constitution says, the “maximum benefit” to the public, for our oil. An open discussion isn’t one that tells hard-working Alaskans and those who struggle to pay for heat that they should pay, but that the oil industry should be left with a sweetheart deal on the oil that Alaskans own in common.

I was fortunate to become friends with, and to be able to listen to, former Gov. Jay Hammond. He used to say that before you tax Alaskans, or consider Permanent Fund Dividend cuts, you get a fair share for Alaska’s oil. Whether you agree with his politics, his political acumen was correct. The public won’t pay money that in effect subsidizes a major oil industry short-payment to Alaskans for our oil.

Want a few facts showing why the 2013 oil tax rollback pushed by former Gov. Sean Parnell, some legislators and the major oil companies went too far?

The production tax rate on all oil fields started after 2002 is so low it produces a negative “net present value” for Alaska today. Even if oil prices returned to $110 per barrel, these and all new fields, including the Arctic National Wildlife Refuge (if it’s ever opened) will pay a production tax that produces a near zero or negative net present value for Alaska. Private companies don’t sell their products that cheaply, and we shouldn’t either.

Under current law, Alaska will owe companies roughly $600 million more in state-paid oil tax credits for 2015 and 2016 than we get paid in production taxes. That’s a recipe for crippling schools, law enforcement and emptying our savings.

Some say changing tax credits to small explorers is the full answer. They’re wrong. We need an oil production tax that earns Alaskans enough — a fair share — that we both get fair revenue to help fund public safety, education and savings, and can afford more smartly-crafted development incentives to spur new North Slope production.

Today, a meager 4 percent production tax rate applies all the way up to $80 or $90 per barrel on big, profitable oil fields. Alaska’s production tax is even lower, or negative, on post-2002 oil fields.

Alaskans deserve a discussion with reliable experts, rather than the “experts” who misleadingly danced around hard questions and served as shallow cheerleaders for Parnell’s 2013 plan. And we all need to work on eliminating government waste, like continued spending on the $6 billion Susitna-Watana Hydroelectric Project.

Sure, Alaska gets a royalty, oil companies pay a small corporate tax and property taxes go mostly to local governments, but the production tax has been Alaska’s mainstay for state revenue.

Finally, let’s take a few red herrings off the table.

Those of us who want our oil tax fixed also proposed balanced reforms to the older law, ACES. The retort that we simply want to “return to ACES” ignores production tax and incentive bills Democratic and Republican legislators have proposed.

Some say we narrowly voted to keep this law last election, but we voted in the low-turnout primary and not the general election, when Alaskans would have said “yes” to repealing this law. Current polls show Alaskans want oil tax reform.

Finally, big oil companies aren’t making their normal $2 billion plus in annual Alaska profits at low oil prices — but they’re doing fine. ConocoPhillips is the only company that reveals its Alaska profits. SEC filings show they made $340 million in profits the first half of 2015 in Alaska, more than they made in the rest of the world combined. They lost over $700 million just in the Lower 48. Prudhoe Bay, Alpine and Kuparuk are among Conoco’s most profitable oil fields.

We should never be scared of public opinion. Let’s have an open debate, not a stifled one.

• Rep. Les Garais, D-Anchorage, is a member of the House of Finance Committee.


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