A University of Alaska Anchorage researcher reported SB21 is generating growth and positive results for Alaskans, amid claims by some that the new oil tax system has already failed.
The report, by economist Scott Goldsmith of the Institute of Social and Economic Research at UAA, attributes only 4 percent of the state’s decline in revenue to the new oil tax structure.
Anchorage Republican Sen. Cathy Giessel chairs the Senate Resources Committee, and said the Goldsmith report is evidence that the new tax structure is the right way forward for the state.
“This data is sound and from a reputable source; it’s good news for Alaska’s economy and for a vibrant future,” Giessel said, adding that SB21 is more advantageous for the proposed natural gasline project. “The increased investment by companies on the North Slope is a critical part of an in-state gas pipeline.”
Gov. Sean Parnell told the Empire that Alaska’s $2.1 billion revenue shortfall is “a result of price and production, and it would have occurred under ACES or the More Alaska Production Act.”
The increased North Slope investments — which is up at least $3 billion — is what Parnell has pointed to when defending the positive impact of his hallmark legislation.
“We’re clearly on the right track to more production,” he said.
Parnell added that Department of Revenue projections, which indicate declining production over the next decade, are intentionally conservative estimates that do not consider potential new development.
“Oil companies do not put drilling rigs on a piece of ground without virtual certainty that they’re going to find something there,” Parnell said. “Yet the Department of Revenue will not count those barrels until they come online.”
Still, the controversial oil tax is not without opponents who say the increase in investment cannot be counted on as certain future revenue.
“In contrast to Goldsmith’s rosy scenario comparing the ACES and SB21/MAPA tax regimes on a make-believe investment, the reality of Alaska’s oil future as projected by the Parnell administration is dismal,” Vic Fisher, chair of the anti-SB21 group Vote Yes Repeal the Giveaway, said in a statement.
The fight over SB21 will be decided by Alaskan voters in August when the option to repeal the new law is offered on the ballot.
Republicans and other supporters trumpet the bill as an incentive for oil companies that will bring increased production and jobs on the North Slope, but it’s accrued a different alias from its critics — “The Oil Wealth Giveaway.”
“Changing the tax law has not had the desired result of increasing net production in the past,” Fisher said. “What Alaska needs is a tax structure that increases exploration for new sources of oil and gas, not just provide incentives to pump the oil they are contractually obligated to produce.”