My Turn: Muñoz speaks out on oil issues

Posted: Thursday, March 17, 2011

Last week the Empire reported on a presentation I made to a recent Native Issues Forum that I believe mischaracterized the work of the House Resources Committee, my vote to move oil tax legislation out of that committee, and the fiscal realities now facing Alaska.

The House Resource Committee is charged with reviewing legislation affecting our natural resource industries. The amendments Rep. Paul Seaton, R-Homer, authored were incentives in the form of tax credits for new petroleum exploration outside of the existing legacy fields. I supported the amendments, and supported moving the bill to the next committee of referral, House Finance, where substantive work is done on the financial aspects of a bill.

Regardless of one’s position on the governor’s proposal, a consensus is emerging in the Legislature on the trajectory of Alaska petroleum production and how it is leading Alaska to certain fiscal and economic disaster. Since 1989 we’ve seen production decline by two-thirds. Government and industry engineers say that further decline will render the pipeline technologically and economically un-useable by the end of this decade.

The reductions that would come from a cessation of pipeline operation are almost unthinkable. The price of oil needed to balance our budget was $77 a barrel in fiscal year 2011, today it stands at $83 a barrel for FY 2012. That should cause all Alaskans to consider what is expected from their government in the way of services. Enterprise funds that now receive state General Fund support would no longer be funded. Discretionary, spending such as reimbursement of municipal school debt and education funding in general would almost certainly be reduced. Payments to state and municipal employee retirement funds would take a material portion of remaining savings.

I believe new petroleum development should be a priority. Gov. Sean Parnell is to be commended for his leadership in trying to increase production. Before I vote for any change in our current oil tax structure however, I will need to see commitments of investment that can and will be verified by the Alaska Department of Revenue. A commitment for Alaska job increases corresponding to increased North Slope production must be made.

The case can be made that the picture is not as bleak as I have portrayed. Along with consideration of modifying oil taxes on state land, there are federal offshore oil deposits, a potential for shale oil to help fill the pipeline, and a possible eventual monetization of North Slope natural gas. But none of these potential developments will take place without action taken in Juneau or in Washington, DC. Alaska cannot simply stand by in hopes of relief from the federal government.

This is a critically important issue for Alaska. Please contact me with your thoughts on House Bill 110.

•Muñoz represents Juneau and chairs the House Community and Regional Affairs Committee.

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