Parnell defends oil tax bill at World Affairs Council

Gov. Sean Parnell speaks about what he learned on his recent trip to Europe to study oil and gas taxation at Centennial Hall on Thursday. The speech was sponsored by the Juneau World Affairs Council.

Gov. Sean Parnell went before the Juneau World Affairs Council Thursday where he used his recent trip overseas as anecdotal support in signing an overhaul of Alaska’s oil tax structure last month.


Between Alaska, Scotland and Norway, the industries had similar structures.

“Like Alaska, the North Sea is a harsh, unforgiving environment. It’s an off-shore industry with platforms, supply ships, helicopters, sub-sea pipelines,” Parnell said. “They, like us, have relatively mature fields.”

In comparing Alaska’s potential oil wealth to that of what the North Sea produces, Parnell weighed similarities and differences between past tax structures they’re using with ones Alaska used and have since reformed.

“In the last decade, North Sea production, we were told, was declining about six percent per year,” Parnell said. “In two years, it was declining 15 percent per year. Any of this sounding vaguely familiar?”

After meeting with senior leadership, trade associations, law and tax professors, port officials, oil field contractors and more in both the United Kingdom and Norway, Parnell contrasted how taxes are levied here and abroad saying that more taxes equal less investments, less taxes equal more investment.

“It’s very easy for governments to be shortsighted and skim off those taxes today under high oil prices, but these investments are made under long-term investment models,” Parnell said. “Common sense tells you the less competitive you are, the less capital you attract to your area.”

When Parnell signed SB 21, the major overhaul to Alaska’s oil tax structure, he hailed it as historic legislation, repeatedly referring to it as the More Alaska Production Act.

“If we can garner more investment from the tax changes we made with the More Alaska Production Act,” Parnell said, “Alaskans will benefit immensely from the jobs and opportunities that are created.”

The signing of SB 21 signaled a major success for Parnell. It brought lower taxes on the state’s main industry following a three-year campaign that began as an initiative led by former Gov. Sarah Palin in 2007 known as the Alaska’s Clear and Equitable Share.

The More Alaska Production Act has a higher percentage base tax rate, but unlike ACES its incentives are focused on new production and not solely investment.

Parnell has championed tax cuts this large saying it is imperative for turning around the declining production at Alaska’s Prudhoe Bay. If the decline continues with barrel prices between $109 and $118 it could cost the state $4.6 billion for more than a decade.

It’s no secret that Alaska relies heavily on oil revenues and the bill signing in May came as a blow to residents throughout the state who saw it as ineffective, a reverse step--concerns that were addressed by several at Thursday’s council meeting.

“No matter how you look at it, we’re on the downward slope, yet there is plenty more oil to be had that isn’t being pursued,” Parnell said. “But by making it more economic for new oil, we increase the chances that companies will go after that.”

Parnell didn’t think the state was ready to get more directly involved with investing and producing oil for itself, though that was how some countries reversed their decline overseas.

“That’s something we’ve not pursued to date. We’ve taken the traditional role,” Parnell said. “We’re not competent in that arena like the major players are. But you do see us moving in those areas where we have confidence.”

When asked how he could quantify the success of SB 21, Parnell said there was no metric.

“I measure success by new investment, new production, new opportunities for Alaskans,” Parnell said. “If the opponents of tax reform say ‘they would have done it anyway,’ they might have done some of that ... but I still will claim victory today for Alaskans because there won’t be that delay, that opportunity will be created.”

Contact reporter Kenneth Rosen at 523-2250 or at


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