The Legislature has begun examining my proposal to spur investment in our state and create jobs for Alaskans by adjusting our oil tax rates.
We are blessed to have plentiful natural resources powering our homes, building our economy, creating jobs, and fueling our way of life.
Yet we stand at a critical juncture for the future of our state: Do we want to increase the incentive for production of our rich resources and move forward together into a future of unlimited opportunity, or do we want to maintain the status quo?
We cannot afford to stand still and watch the life of our economy drain slowly from our pipeline, and watch oil investment move to Russia, Brazil, and elsewhere.
America needs Alaska’s oil. Egypt’s current instability and the risk to the Suez Canal once again illustrate just how critical it is that we provide oil to our country as we work toward energy independence.
My administration has proposed two-pronged legislation. We propose tax credits for drilling additional wells in the legacy fields. When companies keep their capital in Alaska, it creates additional payroll for Alaskans’ pockets. For those companies taking bigger risks and exploring outside of existing fields, we are proposing a lower base tax rate to compete for their capital.
For all taxpayers, we are proposing a cap on production taxes collected by the state of Alaska. The approach we’ve taken is the result of thoughtful study and asking economists how to bring investment back to our state. It’s all about job creation for Alaskans and ensuring a steady volume of oil in the pipeline.
History has shown that the more you tax something, the less you get of it. The more we tax companies for producing a commodity, the less they will produce here, and the more they will produce elsewhere.
On the other hand, with the energy industry providing over 90 percent of state’s annual budget, cutting taxes will not just create jobs but, by increasing exploration and investment, will lead to greater revenue.
As we’ve seen recently with Shell’s inability to get an air quality permit, federal foot-dragging has led to repeated delays in exploratory drilling and production, at tremendous cost and job loss for Alaskans. We can, however, focus on developing oil on state lands, but we must provide incentives for companies to make the significant investments needed.
Each well will bring hundreds of new jobs. They may not be the large finds of the 1960s and they may attract the interest of mid-sized oil firms, rather than the super majors. These companies will only invest if they are not punished by heavy taxation. For example, the ring of land south of Kuparak and Prudhoe Bay has vast development potential for which independent companies can compete.
We’ve seen how reducing taxes on an industry works. Together, we cut the passenger excise tax by nearly 25 percent and, as a result, companies are returning their ships to Alaska. The less you tax, the more you get.
We can restructure our oil taxes and incentivize production, and we ought to do it, because while Alaska has one of the largest budget reserves of any state in the nation, the goal is not to increase those reserves endlessly while Alaskans’ jobs dissolve. Let’s continue to fund needed services, set money aside for the future, and grow jobs today in the sector with the largest growth potential.
Alaska’s elected officials are tasked with keeping our state’s economy strong. Changing our oil taxation structure will take courage and willingness to listen. It is our best way forward.
• Parnell is the governor of Alaska.