Alaska editorial: Take time with ACES

Posted: Thursday, February 25, 2010

The following editorial appeared in the Fairbanks Daily News-Miner:

The renewed debate about the effects of Alaska's oil tax rates seems to offer something to feed everyone's biases. Too little agreement on the facts has emerged.

The Alaska Support Industry Alliance kicked off the discussion by asserting in a high-profile ad campaign that oil industry spending and employment is in a devastating tailspin because of higher taxes imposed three years ago.

The state Department of Revenue responded with statistics showing employment actually went up - way up - after the state adopted its new tax regime, Alaska's Clear and Equitable Share.

The Alliance, sponsors of the "Faces of ACES" ad campaign, countered that the employment increase was almost entirely because of BP's efforts to fix corroded pipes on the North Slope and said the jobs will disappear soon without having added any oil to the pipeline.

Then a state-hired consultant told the Legislature he detected no drop in ConocoPhillips' capital spending in Alaska following the adoption of ACES. And the total oil tax take in Alaska is in the mid-range compared to other places in the world, he said, which seemed to rebut industry claims that the state of Alaska's rates are among the highest.

What are Alaskans to make of all this? We all have plenty of impressions to feed our preconceptions, if that's where we want to go. But some greater certainty about what is happening in the oil patch would be more comforting to those who prefer to question preconceptions before elevating them to absolutes.

There is no doubt that ACES takes a substantial bite out of oil company profits and therefore was a risky path for the state at a time when it needs to encourage investment to keep the pipeline operating. It's also hard to argue with the industry's assertion that certain categories of oil work have dropped off recently. Active oil rigs are hard to miss; if they aren't working, no amount of statistical analysis can conjure up the associated jobs and new oil production.

But with ACES so fresh on the books and with the world's economy having been in turmoil during much of the new tax system's short tenure, it is probably too soon to declare the state's oil tax regime an outright disaster or an unmitigated success. It will take some serious study. It won't be resolved in this legislative session.

The Legislature and the state administration should make sure they establish sound methods of sorting out the facts, no matter which of today's preconceptions those facts support. Members of future Legislatures and all Alaskans will need the information.

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