Q&A: Oil tax key issue in governor's race

Posted: Monday, August 09, 2010

ANCHORAGE - Alaska's oil tax is a key issue in the Democratic primary in the race for governor.

Ethan Berkowitz and Sen. Hollis French talked about the tax and funding state government Thursday at a Commonwealth North candidate forum.

French defended the oil tax. Berkowitz wants to replace it with a system in which a state commission negotiates royalties for each oil field.

Below are excerpts from the discussion from The Anchorage Daily News:

What will you do to ensure a stable and predictable financial future for Alaskans?

French: "Take our oil revenue and invest in renewable energy to make certain energy prices stay low. ... Invest in education, make certain we have a powerful education system pumping out intelligent young graduates. And keep a fair oil tax on the books to pay for that. ...

"Since we passed ACES (the oil tax) in 2007, employment is up on the North Slope; since we passed ACES in 2007, capital investment is up; and since we passed ACES in 2007, the state has gotten a fair share of the oil wealth. In 2008, when oil prices hit $145 a barrel, the state put $5 billion into savings ... we saved it through bipartisan work in the Senate."

Berkowitz: "The idea I've had builds around the genius of the Permanent Fund. And the genius of the Permanent Fund is that you take a nonrenewable resource and you convert it into something renewable ... there's no reason why oil that's been cooking in the ground for millions of years should be spent to sustain this year's budget and deprive the next generation of the benefits of that. So what I'd like to see happen is that we put all our oil wealth into some kind of account. Instead of spending it first, we save it first before we start to spend it."

(Berkowitz was asked how he'd fund state government if Alaska's oil money was socked away.)

Berkowitz: "I propose to fund state government from the stream of revenue that comes out of the permanent account ... we can't get there overnight; it's going to take a period of transition before you take the current (oil) revenues and put them into the fund."

(French was asked how to reverse Alaska's decline in oil production with the oil tax in place.)

French: "When we began to reform oil taxes in 2006 and 2007, the production tax at Kuparuk (oil field) was nearing zero. The point is, there are more things than the tax rate that affects investment. Because I can tell you, Kuparuk was not being invested in at the rate I think was right, or you might think was right. They were not spending millions and millions and millions of dollars at Kuparuk with a zero percent production tax. Why? Because oil prices were low ... There's plenty of reason to keep investing on the North Slope; the oil industry is making plenty of money on their investments."

What is Alaska's top energy problem that you are going to solve in your term as governor and how are you going to solve that problem?

Berkowitz: "I've been impressed to see strides being made toward renewable energy in Alaska, toward making sure the villages are sustainable, that the Railbelt has some energy. But I look at the opportunities that have been squandered. Two, three years ago we all got an energy rebate, $750 million was spent in Juneau. Uncle Sam was the biggest beneficiary; that was income tax to him. And we didn't do one thing to change how we produce or distribute energy with that. And I look at the 100 villages across this state that pay $5, $6, $7, $8 a gallon (for fuel).

French: "The big picture remains the gas pipeline ... AGIA is getting us there, I was proud to be a part of the debate, proud to be a part of the process and when we voted on AGIA on the floor, I said this: 'We are, to a large degree, in the oil and gas business as the state. And we are making an investment today, a big one in what amounts to a well we're drilling. We may hit dust, but we may hit a gas pipeline.' And if we hit a gas pipeline it's going to return a fair economic value to you, and you and you. And moreover, not only to you in this room but all around this state, to Ketchikan, to Kodiak, to Kotzebue, they get a fair share of that resource, they get a fair share of that wealth."

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