Earlier this month, Alaska’s House of Representatives passed a bipartisan oil and gas tax credit reform bill by a 2-1 margin. The story here isn’t so much that half of the House Republicans broke from the leadership. Rather, they stood up to corporate imperialism by reminding the oil industry that Alaskans are in charge of our natural resources — and our government.
The low oil prices that created the state’s fiscal crisis hasn’t just reduced oil tax revenue. It’s revealed a serious flaw in SB 21, the controversial oil tax reform law passed three years ago. In projections for 2017, the income from oil taxes will be almost zeroed out by $825,000 in tax credits the companies are expected to claim.
In January, Gov. Bill Walker proposed legislation to change that. It would repeal numerous credits and increase the minimum tax on North Slope oil regardless of the current market price.
The House began considering their own slimmed down rewrite of Walker’s bill a few weeks ago. Reps. Paul Seaton, R-Homer, and Tammie Wilson, R-North Pole, submitted a 60-page amendment that restored a lot of what the governor wanted. And over the objections of the majority leadership, half of the House Republicans, along with the Democrats, voted in favor of the Seaton-Wilson version.
That amended bill didn’t make it through the senate though. They may be worried it’s “a flagrant money grab,” which is how it was described by Kara Moriarty, president and CEO of the Alaska Oil & Gas Association. In testimony prior to the vote, she said it will “lead to less oil production, less investment, fewer Alaskans working, and … less revenue for the State.”
That’s the same threat the industry trotted out two years ago when we voted on an initiative to repeal SB 21. For that matter, it’s standard operating procedure for most businesses whenever the government considers raising taxes on them.
But if it’s a genuine flaw, then correcting it is not a new tax. And it’s necessary because we shouldn’t be giving the industry a subsidy that’s larger than the combined budgets of the Alaska Court System and the Departments of Corrections, Military and Veterans Affairs, and of Fish and Game. Especially when we’re broke.
“We get it” Moriarty said, “yet, to my member companies, the politics are largely irrelevant to the core of what drives decision-making, and that is economics … and a bill like this makes the numbers worse. End of story.”
Well, she didn’t end her story there. There were three more pages in her written statement. And the Alaska Journal of Commerce published a commentary she wrote on the same day. In that she offers “advice to those in charge” to think strategically about the future of the oil and gas industry in Alaska.
By those in charge she must mean our governor and legislators. But maybe not, because she also posed this question — “What is the vision for the industry, and, by extension, the state” — as if the state is a subsidiary of big oil.
And to some, maybe that’s all we’ve ever been.
Go back three years to the Senate approval of SB 21. The two votes which turned it into law came from Sens. Kevin Meyer, R-Anchorage, and Peter Micciche, R-Soldotna. Despite their employment ties to ConocoPhillips, they each chaired committees that heard public and industry testimony on SB 21.
Sean Parnell was governor at the time. But before being elected lieutenant governor in 2005, he was the director of government relations for Phillips Petroleum Alaska, which is now ConocoPhillips Alaska.
House Speaker Mike Chenault, R-Nikiski, was supposed to be in charge back then too. He recently said he doesn’t think anyone ever considered what the tax credits would mean in the current situation because no one “thought that we would be at $30 a barrel.”
Not everyone in the Legislature was fooled though. Sen. Bert Stedman, R-Sitka, didn’t support SB 21, partly because he saw problems with the credits and minimum tax. And in February 2014, while oil was selling for over $100 per barrel, he proposed legislation to fix it.
But Parnell and those presiding over the Legislature didn’t listen to him.
Was it really, as Chenault admitted, an oversight? Or were they simply trusting the industry? Because, according to Moriarty, the oil companies never saw the credits as a loophole, which is why they can argue that eliminating them is a tax increase.
Moriarty and her industry shouldn’t get to define what constitutes the end of this story. Walker and the Legislature will decide that. And hopefully in the special session the Senate will also remember that Alaskans are the landlord here and Big Oil is just a tenant.
• Rich Moniak is a Juneau resident and retired civil engineer with more than 25 years of experience working in the public sector.
