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My Turn: No deal on tax, gas line is better than a bad deal

Alaska should get more than the governor's proposal

Posted: Wednesday, April 19, 2006

Gov. Murkowski is stumping his "deal-or-no-deal" oil tax proposal promising tons of money, more jobs and the trans-Canada gas line. He dangles the prospect of an extra billion dollars in front of Alaskans and the Legislature. Never mind that we should get more than $2.5 billion extra with $60 oil.

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Meanwhile, oil companies have rolled out another round of the usual threats. "We might leave, slow investments or reduce contributions to Alaska charities if we don't get what we want." Why?

Alaskans, and even some legislators, have dared to question the governor's proposal. Alaskans are demanding comparisons with the proposed All-Alaska gas line and other potentially better oil tax structures.

One huge problem with the low ball 20 percent oil tax proposal is its linkage to a still-secret gas line contract. As long as the gas contract remains secret and linked to the oil tax, there is no honest way to evaluate whether the promised riches are better than other possible deals.

Oil companies have not committed to actually build a trans-Canada gas line even if the governor's deal is approved. Generous and unnecessary exploration credits would further reduce revenue to Alaska.

If we really want to link oil tax policy with future developments, let's create a renewable energy development fund for our vast wind, water and hydrogen resources. Otherwise, de-link oil and gas taxes.

Oil companies continuously attempt to get greater profits by cajoling and threatening governments across the world. Donald Trump might say, "It's nothing personal, it's just business."

That is how Alaska has been pushed since 1977. Alaska allowed oil companies to take more profit from our oil than most other oil producing regions across the world.

Today's high oil prices make it a good time for Alaska to demand its fair share of profits.

If Alaska and oil companies are truly partners we deserve at least half the profits after the federal share is taken out. That's roughly 35 percent in the context of current discussions. Alaska still wouldn't be one of the higher-taxing governments in the world (including federal tax).

If oil prices continue to rise, Alaska would lose ground with the proposed 20 percent fixed tax percentage. The 50-50 share would assure equality and simplify calculations regardless of price. Oil companies could write-off some increased state taxes from federal taxes.

Most of the world's big oil fields have been found and oil companies want to develop oil they now control. America's second largest oil field after Prudhoe Bay is the mostly untouched heavy oil at nearby West Sak. Our current and future oil fields continue to be highly profitable in one of the world's safest oil patches.

Would oil companies really leave if the Legislature raised the oil taxes to 35 percent instead of Murkowski's proposed 20 percent? Probably not. Other oil companies could easily replace any that might leave.

Alaska could cut out the "multinational middle man" and subcontract directly to the same oil field service companies that work for Exxon, ConocoPhillips or BP. Such huge profits could push our permanent fund dividends to $5,000 instead of $2,000. We could fund good schools, roads, health care and revenue sharing for local communities.

Either way, Alaska is simply too profitable to ignore.

The governor claims that higher taxes now will reduce investment later. Where is the proof? What guarantees that oil companies will invest more later if we lower taxes now? Nothing.

Who looks out for Alaskans? Only Alaskans and their ability to make sure legislators understand we want open, honest comparisons to ensure a fair deal regardless of what the governor may claim.

We need legislators who are watchdogs, not lapdogs. What is at stake is who will control Alaska for the next 30 or 40 years, Alaskans or multinational oil companies?

Alaskans, working together, stopped BP's "best-deal" attempted takeover of Arco Alaska in 1999. We have competition on our North Slope instead of a BP monopoly.

The governor's deal is ultimately our choice, but only if Alaskans get informed and involved now.

No deal is still better than a bad deal.

• Jim Sykes is a former director of AkPIRG and Oilwatch Alaska.



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