On This Day in 1981 Alaska Defined ‘Fair Share’
Commentary by
Dave Harbour
On March 18, 1981 the most unique gathering in Alaska’s political history may have occurred when Republican Governor 
Jay Hammond (NGP Photo with author, 6-2001) met with Senate President Jay Kerttula and House Speaker Jim Duncan (both democrats) along with a large array of other Republican and Democrat leaders, in Juneau, to announce that they had achieved a ‘fair share’ of oil wealth for Alaska. (Many readers will join us in remembering with fondness and respect a number of the press conference participants who are no longer with us.)
Governor Jay Hammond Press Conference 3-18-81…
…describes Alaska’s “fair share” flowing from increased severance tax (and an economic limit factor to extend production), reversal of a discriminatory oil and gas income tax and repeal of Alaska’s personal income tax.
Between the 1969 Prudhoe Bay lease sale and the 1981 press conference documented above, Alaskans struggled over the dividing line between a reasonable tax policy that achieves for citizens a Constitutional mandate to provide maximum natural resources benefits to the people while avoiding a system characterized by greed and unsustainable government growth.
As you will observe in listening to this actual audio participants noted that Alaska’s share should not be less than 30%, but the term, ‘fair share’ was employed and this action did result in about two decades of relative tax stability and a trend of increased exploration and development investments which accompanied the most healthy state economy in America.
The oil industry and entire state flourished in an attractive investment climate that succeeded in extending the life of the Trans Alaska Pipeline. When operations began on June 20, 1977, the line had been financed on the basis of 9.6 billion barrels of proven reserves. During the decades following the 1981 press conference, billions in new exploration and development investment expanded produced oil to over 14 Bbs.
The current debate in Alaska now centers around how the state’s elected leaders might sustain an enormous state budget and their economy’s dependence on oil and gas investment. To sustain their oil economy and lavish per capita government services, these elected leaders must determine how state policy can 1) support extending the life of the oil pipeline, while 2) stimulating creation of a gas pipeline project in one of the most costly production areas of the world, amid 3) a fiercly competitive, volatile and shifting natural gas marketplace, with 4) what has become in the last five years one of the highest and most unpredictable oil and tax jurisdictions in the world.
We encourage readers to review Alaska’s current tax policy and reach their own thoughtful conclusions about the path upon which Alaska is embarked. It may help to also consider the words of our leaders speaking from their viewpoints 29 years ago today (see link below), as well as the oil and gas tax policies of other American states, Canadian provinces and other oil and gas producing countries. To solve the difficult challenges of increased entitlement spending and decreasing oil and gas revenue, our elected leaders will need all of the good advice and wise counsel their constituents can muster.
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(Note: recent, relevant news links re: Alaska tax policy; and our oil, gas and tourism tax commentary)
Fairbanks News Miner. Pat Gamble (NGP Photo) will be the next president of the state university system.
(Note: as has been our tradition for nearly a decade, the author urges readers wishing to offer additions or corrections to any report in this webpage to email us here, or add a comment below. -dh)
Governor Jay Hammond and Legislature Define ‘Fair Share’ Of Petroleum Revenue 3-18-81 from Dave Harbour on Vimeo.
Twenty years of tax stability began in Alaska with a press conference on March 18, 1981, along with associated legislation. This new era followed a decade of annual tax increases as Alaskans struggled to define the ‘fair share’ of oil and gas revenues that would have them achieving their constitutional mandate for natural resource benefits.
The press conference featured: Governor Jay Hammond, Senator Jay Kerttula, Senator Don Bennett, Senator Ed Dankworth, Representative Jim Duncan, Representative Hugh Malone, Representative Sam Cotten, Representative Tony Vaska.
Together they announced that with legislation they jointly supported they had achieved for Alaska a “fair share” of oil revenues: 30%. In fairness, we should note that the general sentiment seemed to be that Alaska’s share should not be ‘less than 30%’. Citizens should also understand that while this group of officials made a decision and established a policy, such action does not automatically bind future legislatures to adopt or maintain the same policy. A student of government would also appreciate that while government policies may be changed, the degree that they remain stable affects the reliability of the investment climate and the resulting inflow of investment.
The first ten years of Y2K have resulted in very large industry production tax increases, contentious debates among taxpayers and tax authorities, a return to tax instability and lack of clarity for investors who may be considering gas pipelines and other projects.
Compounding the anti-investment message is a ‘natural gas reserves tax’ voters initiative sponsored by several Alaska lawmakers. The initiative failed in 2008, but its sponsors vow to support it in upcoming election cycles.
Alaska oil and gas exploratory activity is down at this writing as such activity blooms in competitive oil and gas provinces around the world.
Thus, as Alaska had by 2009 become among the most costly places to engage in the oil and gas business, it had also become one of the most risky venues for new investment based on its uncertain initiative process and its unreliable–if not hostile–tax and regulatory policies.
Much of the anti-investment climate strategy flows from a highly disciplined and growing network of national environmental organizations whose goal seems to be to take Alaska back to its pre-pipeline, economic infancy, where activists that are sufficiently well connected will always have a job in a government-dominant State.
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