According to Economist Ed King, the oil companies and the state are collecting about the same amount of net revenues for oil production in Alaska. He is correct in saying that in fiscal year 2018, the combined companies posted about $2.1 billion to their bottom line, and the state collected about $2.1 billion in tax and royalty payments.
Here’s the problem. What any economists writing about Alaska’s oil taxes should know is that no other major oil producer on the planet shares their net oil revenues 50/50 with their producers.
The equity above cost of production and a fair return for investment belongs to the owners of the oil. The international norm is about 90 percent owner, 10 percent oil company. If you have doubt, go to https://www.bp.com/en/global/corporate/what-we-do/bp-worldwide/bp-in-iraq.html. It is a five minute video produced by BP for the citizens of Iraq. About four minutes in, BP explains that Iraq receives 98 percent of the net revenue from BP’s production.
Had Alaska gotten the more normal 90/10 split, Alaska’s share would have been $1.68 billion higher; enough to add an additional $2,400 to the dividends paid last year.
If you were using a real estate broker to sell your fully-paid-for $300,000 house, would you give half your equity ($150,000) to your broker, or would you pay a normal of 6 percent ($18,000) of the broker’s commission?
King says to most people that the state and the oil companies collecting equal amounts sounds fair. The only reason that sounds fair is because the oil companies have spent tens of millions of their ill-gotten profits paying economists and others to keep Alaskans in the dark while they pick our pockets.
Ray Metcalfe
Anchorage