Debate over the governor's oil tax and gas line contract proposals includes a verbal tug-of-war over what the framers of Alaska's Constitution intended. As delegates to the convention that wrote the constitution, we KNOW what was intended.
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Alaska achieved statehood to control its resources after decades of Outside exploitation. No delegate would have considered turning over Alaska's oil and gas resources or strip the Legislature and voters of the right to control the state's tax system, as would happen if the governor, oil companies and their agents managed to stampede the Legislature into a deal that is neither good for Alaska nor will advance pipeline construction.
We have studied the governor's proposals, and we believe that they are a fabulous deal for Exxon, BP and ConocoPhillips.
But, it's a bad deal for Alaska.
It's a bad deal because the companies get excessive control over major Alaska oil and gas resources, they obtain tremendous fiscal benefits, and they provide little in return.
The deal violates Alaska's Constitution, and it provides only limited benefits to Alaska's people. It's bad, because it does not guarantee there will be a gas pipeline. And the deal may not deliver the billions of dollars that are being dangled before us, but it surely puts the state at great risk.
Alaska's Constitution states: The power of taxation shall never be surrendered. But giving up the power to tax oil and gas is exactly what Exxon, BP, and ConocoPhillips demand, and what Murkowski supports in the proposed gas line contract.
Here is why their contract approach fails the taxation provisions of the constitution:
1. Giving up the right to tax oil and gas is clearly a "surrender", and that is patently unconstitutional.
2. The constitution authorizes temporary tax exemptions. The governor's proposals are not "temporary."
3. Only tax exemptions are authorized, not whole new tax regimes.
4. A tax exemption can only be "granted by general law," however, the governor's proposed Stranded Gas Act amendments would result in special legislation, which is prohibited by the constitution.
Alaska's Constitution also directs the Legislature to provide for the utilization and development of the state's resources - including oil and gas - for the "maximum benefit" of Alaska's people.
Does the Governor's deal meet the "maximum-benefit" test?
No. Here are just a few of the horrendous aspects of the proposed contract:
1. There is no commitment to build a gas line. There are no timelines, no benchmarks, no enforcement provisions, and no real penalties for nonperformance.
2. There's no commitment to provide gas for Southcentral and other parts of Alaska. While four take-out points are provided for, the contract states that "gas does not have to be sold in Alaska."
3. The state agrees to indemnify producers for a variety of obligations and losses not of the state's making, and agrees to subvert the initiative process.
4. The contract repeatedly surrenders state management, regulatory authority, court jurisdiction, and other aspects of state sovereignty to the producers.
5. The state gives up its jurisdiction over existing and future North Slope oil and gas fields, including Point Thompson.
6. Beyond all that, the state accepts PPT tax provisions that, with credits and deductions, will provide a heyday for oil company accountants and attorneys, assuring minimal state revenues, no matter how high oil prices may be or how much the companies earn.
No, Alaskans do not need to sacrifice the public interest and take tremendous fiscal risks in order to develop gas resources. Despite all the rhetoric, the governor's deal with the producers is not going to bring us a gas line in the foreseeable future. .
Legislators should reject the PPT tax proposal. They should during this session adopt a gross production tax for oil, separate from gas taxes. They should reject the contract and Stranded Gas Act amendments. And they should proceed toward a contract that assuredly builds a gas pipeline, deals with gas only, and preserves Alaska's sovereignty.
This is not a matter of politics. It's what's right for Alaska.
Jack Coghill and Vic Fischer were elected delegates in Alaska's Constitutional Convention, 1955-56. They both served in the territorial House of Representatives and the Alaska State Senate. Coghill also was lieutenant governor for four years.
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