Excited and grateful to tackle the issue, my administration and the 25th State Legislature owe it to Alaskans to determine the value of Alaskan-owned resources, declare that value, and move the state forward as we share that value with producers of our resources.
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Alaska's extremely valuable oil supply is being sold for us today at a premium. Markets are hungry for our oil, and we have a mutually beneficial relationship with these companies as they pump oil for us, deliver it across America, and sell it for healthy company profits.
Alaska's share of oil wealth comes from combining royalties and taxes. Previously, the 24th Legislature placed a value on oil and adopted the Petroleum Profits Tax system to generate about a $2.2 billion portion of the state share this year to fund essential services. But PPT is not working as promised, and Alaskans will be hundreds of millions of dollars short of what PPT was supposed to provide. Also, PPT has many loopholes that allow oil companies to write off expenses such as deferred maintenance costs to fix their corroded pipes, and we increased our audit and litigation risks without tools to protect Alaskans. Many other PPT shortfalls, coupled with oil service company corruption scandals, lead me to propose solutions to more clearly and equitably determine our oil's value through a more sensible system.
I tasked our Department of Revenue to take the politics out of this issue, crunch the numbers, show Alaskans a formula that could produce what the 24th Legislature was promised, close PPT's loopholes, and create an attractive investment environment for new exploration and development of our resources.
The solution we've developed is Alaska's Clear and Equitable Share plan. ACES is the hybrid valuation plan incorporating gross and net features that assures us appropriate value during high oil prices, shares risks during downturns, and credits companies for new private sector investments.
We expected criticism over aspects of ACES, especially from oil industry players, but it was unexpected and disappointing to hear a legislator's warning upon presenting the plan, that, "The fight is not over!" What fight? My administration is seeking fulfillment of Article VIII of our state constitution that mandates we develop resources for the maximum benefit of Alaskans. Legislators swore to uphold that same constitution, putting us all on the same team with the same goal. Though it may be unconventional in the world of Alaskan politics, I am committed to working together as a team to adopt the best plan, with legislators' welcomed amendments to make ACES even better. How 'bout we go into this without assuming that "fighting" and politics-as-usual is the only way to debate, determine, and share our oil's value with producing companies?
Another critique lobbed is that determining our oil's value is too tough to tackle in a 30-day special session, suggesting we shouldn't even begin to fix what is obviously broken. But legislators have an extremely full agenda (including the politics involved in an election year) to address in their new, voter-mandated 90-day session. All the more reason to consider ACES concepts sooner, rather than later. The concepts aren't new to legislators who were engaged in previous PPT debates. Key to success though is to go into this with an enthusiastic, positive approach instead of a defeatist attitude and procrastination.
It's imperative we determine our oil's value, today, especially considering changes on the national scene that impact Alaska's receipt of federal funds, our challenge in reining in government growth, and our commitment to a competitive investment environment that attracts new development.
Henry Kissinger said: "Too often competing pressures tempt one to believe an issue deferred is a problem avoided; more often it's a crisis invited." We can't defer because the crisis we'd invite is the stifling of an energized, pro-private sector climate that Alaska deserves. We won't defer because our incredible potential, including good jobs for Alaskans in a healthy and educated state, is out of reach until we trust our oil wealth is shared clearly and equitably.
Sarah Palin is the governor of Alaska.