Anchorage Democrat Sen. Bill Wielechowski Wednesday defended Alaska’s oil production tax structure and criticized Republican Gov. Sean Parnell’s proposal to overhaul the system during the biweekly Native Issues Forum sponsored by the Central Council of the Tlingit and Haida Indian Tribes of Alaska.
Wielechowski gave an abbreviated version of his presentation entitled “Debunking Myths About ACES,” which leans on graphs, charts and tables to dispel criticisms of ACES, the Alaska oil tax regime, at the event.
Parnell and other critics of ACES have argued that the tax system is not competitive relative to other oil producers in the Organisation for Economic Co-operation and Development, a group of countries often considered to constitute the democratic and capitalist developed world.
But Wielechowski compared Alaska’s oil taxes to both OECD countries and member states in the Organization of the Petroleum Exporting Countries, a collection of oil producers in Africa, the Middle East and South America.
OPEC countries typically have a higher effective oil tax rate than OECD jurisdictions, and many suffer from political instability as well or have economic policies that are unfriendly to foreign investors, as Wielechowski highlighted during his remarks.
“In the whole scheme of things, Alaska’s probably not a terrible place to do business,” Wielechowski said.
Wielechowski also cited a graph produced by Econ One Research Inc., a consulting firm hired by the Parnell administration to look at the oil tax issue, that shows the continuing decline in oil production from the North Slope began in the late 1980s.
“Now, nobody’s happy with continuing production declines, but it certainly wasn’t caused by (ACES), because we didn’t have it in effect at the time,” said Wielechowski.
One theme that Wielechowski repeated throughout his presentation is that of ELF, the former oil tax system that was ended in 2006, as a failed “experiment” in taxing oil producers at a low rate.
“We’ve had a 20-year experiment in Alaska with low taxes,” Wielechowski said in his conclusion. “During that timeframe, it did not create new jobs. It did not create new production. It did not create new investment.”
Wielechowski added, “Under ACES, you have all-time highs in investments, all-time highs in jobs, all-time highs in the number of companies filing tax returns in Alaska. Exploration has increased. Profits are up through the roof. … This is not the time to be giving back billions and billions of dollars to the richest, wealthiest corporations in the history of the world and asking for nothing in return.”
Parnell’s proposal, which is being heard in both chambers of the Alaska State Legislature this month, would remove ACES’ progressivity element, leaving a 25 percent base production tax rate in place, and remove or restructure certain tax credits. Democrats oppose both changes.
Alaska Department of Revenue Deputy Commissioner Bruce Tangeman responded Wednesday afternoon to Wiechelowski’s presentation.
“We’ve had several consultants now testify in committee that we are not competitive,” Tangeman said. “And it’s not a myth.”
Tangeman attributed the increase in North Slope jobs starting in 2006 to maintenance needs. BP temporarily shut down Prudhoe Bay production in mid-2006 after discovering serious corrosion in its pipeline there.
A central argument of the Parnell administration, which Tangeman reiterated Wednesday, is that Alaska’s oil production and tax system cannot be viewed “in a vacuum,” in Tangeman’s words. He said increases in the oil and gas industry’s investment, exploration and employment in Alaska have been relatively flat compared to booms in North Dakota, Australia and other competitors in the past several years.
“We can see what’s happening elsewhere around the world,” Tangeman said. “Booms are everywhere else. … We’re sitting on the sidelines.”
Tangeman also dismissed Wiechelowski’s comparison of Alaska to OPEC countries.
“We as Alaska need to compare ourselves to who we’re competing against,” said Tangeman. “They’re vastly different regimes. We’re not OPEC. We’re not communist countries. We don’t operate like that. We operate in a free-market society.”
While Tangeman expressed confidence that Parnell’s proposed reform will, unlike ELF, lead to increased production without harming the state’s revenues — a fiscal note attached to the governor’s bills suggests it will cause a net loss in revenue over the next several years without new production, especially at high oil prices, but could lead to a net increase in revenue with substantial new production and lower oil prices — he acknowledged Alaska must compete with oil-producing jurisdictions that have a lower cost of doing business, easier access to resources and local refineries.
“They’re hurdles that we have to overcome,” Tangeman said.
Another Anchorage Democrat, freshman Rep. Geran Tarr, also spoke at the Native Issues Forum, taking the stage after Wielechowski after arriving late from a session of the House of Representatives.
Tarr attributed the delay to a House vote to pass her House Joint Resolution 5, expressing the Alaska State Legislature’s opposition to Massachusetts biotechnology firm AquaBounty Technologies’ application for its genetically engineered AquAdvantage salmon to be federally designated as safe for aquaculture and human consumption.
The United States Food and Drug Administration is poised to give final approval to the application, but has extended a public comment period on the matter, of which Tarr and her fellow legislators seek to take advantage.
Tarr said the AquAdvantage salmon, which are engineered to grow faster than natural salmon, pose a threat to Alaska’s seafood industry and could cause environmental harm if they escaped into the wild.
“I’m pleased to say just 20 minutes ago that Resolution 5 passed with unanimous consent,” said Tarr to applause. “So we’re excited the House has stepped forward … and said we oppose this application and we are encouraging the federal government to say no as well.”
Tarr also invited attendees to sign a petition against GM salmon.
“What I would like to do is invite all of you to become a part of the message that Alaskans don’t support this,” said Tarr.
Parnell and all three members of Alaska’s congressional delegation have also voiced opposition to permitting the GM salmon, which some skeptics deride as “Frankenfish.”
Wielechowski and Tarr took questions afterward. The senator fielded two questions on local hiring from audience members concerned that too many jobs in Alaska are going to people who are not Alaska residents.
Wielechowski described the rate of local hires on the oilfields as “appalling,” but said the state’s hands are tied by courts’ interpretation of anti-discrimination ordinances in state and federal law.
“It’s just extremely difficult to draft a piece of legislation that allows us to require Alaska hire,” Wielechowski said. He added that it is “easier” to require state employees to be Alaska residents and agreed with a questioner that the Alaska Marine Highway System should hire more Alaskans.
• Contact reporter Mark D. Miller at 586-1821 or at email@example.com.