By Robin BrenaBallot Measure One (Prop. One) amends the current production tax system to be fair and transparent. In a recent interview with a Bloomfield reporter, I was asked, “What is wrong with the existing production tax system?” Alaskans should know the answer.
Our current system was shaped by Texas-based oil companies through Senate Bill 21 (SB21). SB21 is hopelessly flawed and needs to be amended for the following seven reasons:
First, SB21 took too much. For decades, Alaskans recovered a fair share for our oil. Since SB21, the State has paid producers more in cashable credits ($2.1 billion) than they have paid the State in production taxes ($2.0 billion). In the five years before SB21, we averaged $3.8 billion per year in net production taxes; after SB21, we averaged zero. We now get about one-third of what other states get for their oil.
Prop. One takes back a fair share that is less than our average share for the past 30 years.
Second, SB21 gives wasteful credits. SB21 gives away $8 for each revenue barrel of oil produced or about $1 billion per year. In 2018, the $8 per-barrel credits reduced our production taxes from Prudhoe by $742 million, from $972 million down to $230 million.
That year, ConocoPhillips made $40 per barrel in net income from Prudhoe, $11.64 per barrel from the Lower 48 and $11.72 per barrel internationally. So, we gave away $742 million in wasteful credits for oil they would have produced anyway while they make three times more per barrel than anywhere else in the world.
Prop. One eliminates these wasteful credits.
Third, SB21’s ridiculous 4% minimum rate. During the past three decades before SB21, our major fields demonstrated they could pay a fair minimum rate and attract investment.
Prop. One keeps 4% in place for new and developing fields but raises the 4% minimum rate to 10% for our three major fields.
Fourth, SB21 eliminated progressive rates. When oil prices and producer profits rise, so should Alaskans’ percentage share. SB21 eliminated progressive rates. That is why under SB21 we stay broke as oil prices and producer profits rise.
Prop. One adds a little progressivity back.
Fifth, SB21 has big loopholes. SB21 allows unrelated costs to be deducted from Prudhoe. ConocoPhillips is deducting the costs of developing federal lands in NPR-A from the production taxes they owe us for oil from Prudhoe. This loophole alone will increase the state deficit by $300 million. No other state permits such costs to be deducted from production taxes.
Prop. One limits the costs that may be deducted to those relating to production from our major fields.
Sixth, SB21 keeps profits secret as they whine about not making enough. Alaskans are kept in the dark while our oil wealth is being taken. As owners, we should know basic information about our three major fields. No other resource owner in the world is in the dark when they take a percentage of net income.
Prop. One allows Alaskans to know.
Seventh, there is no reasonable alternative. SB21 is not sustainable. Alaska is broke. We have spent $18 billion in savings, are losing our PFDs, and lack funding for education, universities or capital projects and jobs. Alaskans either have to take back our fair share to keep $1.1 billion per year more in Alaska helping Alaskans or pony up new taxes to support giving away our oil away to Texas. Your choice!
Vote yes for Prop. One before SB21 drives Alaska even further into the poor house!
•Robin Brena is a life-long Alaska who is an original sponsor of Ballot Measure 1, Chair of the Oil and Gas Transition Committee for the Walker administration, and founder of Brena, Bell & Walker, a long-time Alaskan oil and gas law firm.