Part I: Has Alaska Become A Place Where A Deal Is A Deal?   (Part II, Part III)

In August, we’ll find out

Commentary

by

Dave Harbour  

Today’s Anchorage Daily News contains a ‘news’ article describing how Alaskan oil companies are “pouring” millions of dollars into an effort to stop repeal of the State’s oil tax reform law.

Citizens should be applauding the companies for upholding a law approved less than a year ago by Alaska’s Governor and a majority of the elected representatives of the people.  A number of groups representing the bulk of Alaska’s private sector economy are responsibly recommending a sound “No” vote to repeal tax reform.

Here’s why citizens should join the fight against activist minority and political groups (1, 2, 3, 4, 5) trying to repeal the recently passed reform:

1.  Alaska’s government operating budget is over 90% dependent on Alaska North Slope (ANS) oil production.  Over a third of our entire economy would collapse without ANS oil.  The Trans Alaska Pipeline System (TAPS) that carries ANS oil is 3/4 empty.  It is becoming dramatically emptier: 6-8% per year.  Massive new capital investment is needed to stem and reverse the production losses.  In the most highly taxed, highest cost “oil patch” in the free world (i.e. and we would be happy to discuss Norway anytime, for it is a place where ‘A Deal is A Deal’), our leaders last spring decided to reform the tax burden.  Their objective was to increase capital investment, following several years of study and careful analysis.

2.  The Constitution and our kids.  Politicians are fond of quoting Alaska’s Constitution requiring that natural resources be developed for the “maximum benefit” of the people.  Trouble is, as we observed in this 2012 editorial, greedy constituencies want the “maximum benefit” of anything now…today…for themselves…and to heck with long term, wise decisions that provide a sustainable economy for their children.  We see this disturbing trend played on the national stage as well as in Alaska.

3.  Alaska’s integrity is at stake.  There is no citizen who thinks, “I want our state to be irresponsible”.  There is no investor who would say, “I would prefer to invest my money in an insecure area.”   But when Alaska began increasing its already high oil taxes nearly a decade ago (i.e. after investments had been made), future investment became less secure here.  When Alaska made higher tax collections retroactive, Alaska became a riskier, less reliable place to invest.  Now, when Alaska’s leaders have concluded after years of study that reform is required to save Alaska’s economy, special interest efforts to repeal that effort a year later would put a nail in the coffin of Alaska’s reputation as a reliable place to do business.

4.  The oil companies’ fight is our fight.  Without more investment TAPS throughput inches closer to a disastrous closing of the pipeline and Alaska’s whole house of economic cards gets wobblier by the year.  When the cards fall and TAPS oil slows to a trickle — perhaps even causing closure of the pipeline — every man, woman and child still here will suffer…a lot.  

  • The subsistence lifestyle in rural Alaska will become unaffordable as fuel, airport, social service, transportation, communication and public safety programs and subsidies evaporate.  Over two hundred Alaska Native village corporations and their non profit affiliates along with Alaska Native Regional corporations should be defending tax reform–or live to see their own non profit efforts diminish as their profit making entities face the prospect of increased taxes and fewer contracts.  Huge North Slope Borough, Fairbanks and Valdez oil property taxes can be collected only when oil property is present and viable.  Less investment produces less local tax revenue.
  • Subsidized health care from the smallest village to Alaskan cities will diminish in at least two ways: as direct subsidies diminish and as those with insurance coverage leave Alaska or lose coverage which, in part, pays for charity health care.  Advocates for the poor, disabled and sick should be opposing repeal of oil tax reform with every spare spark of energy they can spare.
  • Education will be one of the hardest hit areas, as state funding of local and statewide elementary, secondary and university programs decreases.  School boards, superintendents and teachers should start appreciating and defending where their funding comes from, in our view.
  • We continue to be surprised at how few non profit organization leaders testify to the Legislature in support of oil companies, how few write letters to the editor.  Yes, Non profits are professional, profligate writers of corporate and foundation grant requests, but how many stand up to support oil company investment — which directly and indirectly affects their own prosperity?

    Alaska has more non-profit organizations per capita (i.e. 6,000) than any other state.  While a third of their funding comes from federal sources, much federal and foundation and corporate funding is given on a matching basis.  Certainly, non-profits providing youth, arts, education, disabled and sports programs will be badly affected as business giving dries up–as we believe it will with repeal of recently passed oil tax reform legislation.   

We do wonder at the motivation of those who argue more money will flow into Alaska’s coffers by repealing oil tax reform.

Two years ago during a private luncheon with a well known liberal leader, she agreed that the state’s economy was in peril.  Then, she agreed that the natural result of an imploding oil industry and economy would be that Alaska could once again become a ward of the federal government where houses are cheap, the population diminishes and where the dozens of federal programs and environmental activist organizations would prosper.  I know that she is well intended and believe her to be not evil, just wrong — at least for my network of friends and coworkers.

A well intended citizen could oppose the tax reform law and support a political party’s numbers simply because he or she is loyal to that party.  In that case, the party’s economic projections may be trusted on faith — however rational or irrational they might be.

A not so well intended politician might simply think, “Hey, opposing tax reform as a ‘give away’ makes me popular with my constituencies, likely to be reelected, more marketable when I retire —  with an oil subsidized retirement check to boot.”

On the other hand, one might think certain constituencies — like Alaska Native oil field contractors — that make more money when the oil industry makes more investments — are biased.

Chambers of commerce throughout the state might be biased in favor of the law which they believe will result in more economic prosperity for their members.

In short, all participants in the growing SB 21 repeal effort — not just supporters of repeal — will be pursuing their own economic and social agendas.

Citizens will listen to the messages amid the din of rhetoric and vote one way or another, or not vote.

As for this editorial writer, free enterprise wins the argument at day’s end.  

We would like to see the 49th state adopt a new slogan: “Alaska, where a deal’s a deal!”  After all, Repsol’s relatively new investment here results, in part, from an expectation of tax reform.  We therefore align ourselves with the majority of our elected officials who are charged with protecting the public interest.  

We further align ourselves with the major employers and taxpayers of Alaska, who have certainly paid their dues, in spades, and at least deserve to operate in a state that establishes and defends fair and predictable tax and regulatory rules.

We will be voting “No” on the August primary ballot measure asking for repeal of Alaska’s oil tax reform legislation.

We believe Alaska’s future will dramatically depend on the outcome of that vote.  And in August, the world will know whether Alaska has matured into a place where a deal is a deal.

Lansing State Journal: Editorial roundup: Obama should approve Keystone – The State Department has given President Barack Obama cover to approve the Keystone XL oil pipeline, despite stubborn objections from environmentalists. He should use it. The president asked the department to assess the carbon impact of allowing Keystone to be built. The answer: None. And, in fact, the study concludes that constructing the pipeline is the most environmentally friendly way to carry heavy crude from Alberta oil sands to Gulf Coast refineries.

Washington Post: Ted Cruz: GOP needs to ‘think bigger than Keystone’ – President Obama should allow the construction of the Keystone XL oil pipeline, but Republicans need to start coming up with other ideas to boost the nation’s energy output, Sen. Ted Cruz (R-Tex.) plans to argue Monday.

Wilkes Barre Times-Leader: COMMENTARY: RICH LOWRY Obama quick to stall Keystone plan – President Barack Obama has urged that we make this a “year of action,” and he is going to do his part by acting with vigor and dispatch to continue to study the proposed Keystone XL pipeline project.

National Geographic: Keystone XL: Is It the Right Fight for Environmentalists? – Last Monday night, when environmentalist activists staged 280 candlelight vigils in 49 states to protest the proposed Keystone XL pipeline—in Washington, D.C., demonstrators inflated a giant black tube in front of the White House—many no doubt wondered if their long campaign to halt the project had reached a turning point.

Boston Herald: Pipeline demagoguery – The State Department’s final environmental study of the proposed Keystone XL crude oil pipeline from Canada almost forces any honest reader to conclude that failure of President Obama to approve the pipeline would be an act of incompetent demagoguery. The pipeline would carry 830,000 barrels a day (about 5 percent of current U.S. consumption) from the oil sands of Alberta almost 1,200 miles to a connection with pipelines in Oklahoma that would route the oil to refineries on the Gulf Coast, already equipped to handle heavy crudes like Alberta’s.

Rapid City Journal: FORUM: It’s time for White House to approve Keystone XL – The Obama administration has searched high and low for every reason possible to delay construction of the portion of the Keystone XL pipeline that runs through South Dakota, but last week’s State Department report on the project’s environmental impact should clear away whatever remains of the White House’s manufactured doubt.