Oil industry: Cut taxes, boost jobs

Skeptical lawmakers question whether oil jobs are being lost

Posted: Sunday, February 21, 2010

Jobs in Alaska's oil industry are down, and some in the industry hope that might translate into oil taxes going down as well.

Source: Alaska Department Of Labor & Workforce Development
Source: Alaska Department Of Labor & Workforce Development

The industry and its allies in the Alaska Legislature are pushing for reduced taxes as a way to boost employment, and in come cases also are linking tax breaks to preference for hiring more Alaskans to work on the North Slope.

They're finding a skeptical audience among legislators who joined former Gov. Sarah Palin to pass the tax, as well as the administration of Gov. Sean Parnell, who was lieutenant governor under Palin.

Much of the debate surrounds job numbers. Are jobs being lost? And if so, why?

CONAM Construction President Bob Stinson is one of the "Faces of ACES," the Alaska Support Industry Alliance's ad campaign against the tax. In a My Turn column in the Empire, he said his company's employment is down 75 percent since ACES was adopted in 2007.

"Because of ACES, a bunch of terrific Alaskans no longer work for me," Stinson wrote.

Stinson found support from Rep. Craig Johnson, R-Anchorage, co-chair of the House Resources Committee, who said "ACES is costing us jobs."

ACES supporters disputejob loss claims

Among those expressing doubts are Democrats in the House of Representatives.

"We fought long and hard to change the oil tax so Alaskans benefitted," said House Minority Leader Beth Kerttula, D-Juneau, a former oil and gas attorney with the Alaska Department of Law. "Jobs are up in oil and gas, investment is up in oil and gas, and profits are very healthy, especially in Alaska."

CONAM Construction prospered at a time when there were thousands of fewer oil industry workers in Alaska.

Johnson said he didn't work for the industry and couldn't speak for them, but introduced a bill to roll back the ACES increases.

His bill, which he dubbed the Alaskan Job Security Act, would reduce ACES' base tax rate and progressivity feature, which raises tax rates when oil prices are high. Sen. Lesil McGuire, R-Anchorage, introduced a similar measure in the Senate.

Data from the Alaska Department of Labor and Workforce Development shows a decline in oil jobs. But the drop happened after a mid-2009 industry peak of 13,000 employees, the highest since construction of the trans-Alaska pipeline. In 2005, there were 8,700 oil and gas employees in Alaska, the department said.

Johnson and other industry supporters say the department has not yet tracked layoffs in recent months.

Industry ally claims 5,000 job losses

Department of Labor data shows a peak of 13,300 jobs in July, with a preliminary December count of 12,900 jobs.

Johnson disputes those numbers, and says they've failed to count more recent layoffs.

"It's closer to 5,000 if you throw everyone in there who lost their job on the North Slope this year," Johnson said.

Industry advocates also say that much of the job gains in recent years weren't because of ACES, but were due to a big maintenance push after poorly maintained oil lines in BP-operated Prudhoe Bay began to cause oil spills.

Democrats say those oil pipeline upgrades may be where some of the hiring came from, but some layoffs came as those line replacement projects ended.

"There's a reason they're working on maintenance; that's because they let those lines go without maintenance for so long," said Rep. Harry Crawford, D-Anchorage, one of several Democrats who have worked on the North Slope.

House Democrats say the reason Alaska oilfield service companies are hurting is the big oil producers are bringing in workers from elsewhere.

Rep. Chris Tuck, D-Anchorage, an electrician who has worked on the Slope, said out-of-state workers seem to outnumber Alaskans working there.

"Unless you have a southern drawl, or a British accent, you're out of place up there," he said.

Boosting employment on the Slope won't always benefit Alaska, he said, when many workers never get outside the TSA security gate at Anchorage International Airport.

"That money is not being spent in Alaska," he said.

Johnson responded by amending his tax cut bill to offer additional cuts to companies which meet certain Alaska hire percentages.

Incentive for local hire

Department of Labor data show the oil and gas industry hiring about 70 percent locally, a long-term decline since a peak of about 83 percent in 1988.

Johnson said his bill would create more jobs for Alaskans, and that would result in a drastic drop in some of the state's social ills.

"The best way to address those concerns is giving them a home, giving someone respect, giving them a reason to get up in the morning," Johnson said.

Rep. David Guttenberg, D-Fairbanks, who has also worked on the Slope, doubted the oil industry would hire more Alaskans.

"This is an industry that has a history of actively opposing this Legislature's effort to hire local Alaskans," he said.

Legislative attorney Don Bullock said local hire was difficult to require without running afoul of the U.S. Constitution, but that Johnson's strategy of offering reduced taxes for local hire hadn't been done before and might win a court challenge.

"You can probably expect to go to court," Bullock said.

"The reason I think it is legal is that half the people I talked to say it is, and half say it isn't," Johnson said.

Rep. Mark Neuman, R-Big Lake, Johnson's co-chair, said they should push ahead with the tax breaks to push for local hire strategy despite the questions.

"We're the Legislature, we're the ones who make the laws," he said.

• Contact reporter Pat Forgeyat 586-4816 or patrick.forgey@juneauempire.com.

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