More than 1,400 Alaskans turned out in statewide rallies in late March to show their support for strengthening the state’s economy by stimulating more oil production.
The Make it Meaningful: Rally for Reform was held to encourage state legislators to make real, impactful changes to Alaska’s oil tax structure in order to boost production and the private sector economy.
A collation of 19 diverse organizations, representing tens of thousands of Alaskans, hosted the rallies.
Speakers addressing the Anchorage rally included Governor Sean Parnell; former Governor Tony Knowles; Barbara Huff , Alaska Teamsters Local 959; Cordelia Kellie, Arctic Slope Regional Corporation; Steve Robustellini, Little Red Services; and Laura Maketa, Mak 3 Construction.
Rally organizers pointed out that since Alaska’s oil taxes were dramatically increased in 2007, oil production has declined even more than predicted. When ACES was passed in 2007, production decline was forecast at 46,000 barrels per day. However, production has actually declined by 150,000 barrels per day.
“Production has declined over 150,000 barrels per day over the last four years, and North Dakota is on pace to out-produce Alaska, maybe even by the end of this year,” said Jim Placquet of Operating Engineers 302 at the Fairbanks rally. “Every Alaskan is in the oil business, and we are feeling the effects of the oil companies’ lack of investment in our state. Juneau needs to make it (tax reform) meaningful, and they need to make it meaningful today.”
RDC board member Todd Abbott, President of Pioneer Natural Resources, said Alaska is not competitive under the current tax structure. In Alaska, an added incentive is needed to compete with states such as Texas that yield a superior return, Abbott said.
“They’re easy to get to, you can drill year round, it’s warm weather, it’s low risk, it’s quick turn, and it’s a very robust service industry,” Abbott said. “When I stack those projects up against projects from Alaska, it’s very hard to justify spending money here when you can spend that money somewhere else for a better return.”
At the Anchorage rally, Governor Parnell said, “Alaskans don’t live in a world of ‘we can’t.’ We live in a world of ‘can do.’ We live in a land where billions of barrels of oil are yet to be recovered. We live in a time where Alaskans can unlock this oil for our own benefit and for future generations.”
Former Governor Tony Knowles agreed. “By all accounts today we are resource abundant, just as we were in 1981. The fields are harder and more expensive to develop, but we know they are there. We are not resource short; rather, we are capital investment short.” Knowles warned of an approaching train wreck if the oil production decline is not arrested and called on Republicans and Democrats to formulate a united position on Alaska’s “fair share” of tax revenues. He urged lawmakers to not come home from Juneau until the job is done.
“Oil fuels our economy,” said Steve Robustellini of Kodiak, an employee with Little Red Services. “I left a dying timber industry when I moved my family from California 12 years ago. I have seen the consequences of lost revenue from an industry that is the lifeblood of a state. It is not so much about ‘Big Oil’ as it is about Alaska, its people, and communities. We need a globally competitive tax structure and long-term sustainability.”
With a government take ranging from 76 to 92 percent, “Alaska must correct its high industry taxation, or the reality of a fiscal crisis will correct it for us,” said Laura Maketa, the co-owner of a family-owned construction business based in Wasilla. She encouraged Alaskans to contact their elected officials and their aides to have a dialogue with them, “even if you don’t think it will matter.”
Cordelia Kellie of Arctic Slope Regional Corporation urged lawmakers to make significant reforms to the tax regime so that she and her fellow Alaskans will have secure jobs in Alaska. “Alaskans need oil tax reform so my peers will have a future in this state.
Organizations lending support to the rallies included the Alaska Bankers Association, Alaska Crab Coalition, Alaska Cruise Association, Alaska Energy Forum, Alaska Forest Association, Alaska Miners Association, Alaska Oil & Gas Association, Alaska State Chamber of Commerce, Alaska Support Industry Alliance, Alaska Trucking Association, Anchorage Chamber of Commerce, Anchorage Economic Development Corporation, Associated Builders and Contractors, Associated General Contractors, Consumer Energy Alliance Alaska, Council of Alaska Producers, Make Alaska Competitive Coalition, Prosperity Alaska, and RDC.
The Senate Resources and Finance committees held public hearings in March on SB 192, which outlines the Senate’s approach to oil production tax reform. Over 70 percent of those testifying at the hearings said SB 192 would not “move the needle” in attracting new oil and gas investments to increase production.
SB 192 makes relatively minor tweaks to Alaska’s oil tax structure. As the bill stood in late March, at $130 per barrel, it would reduce oil taxes by $300 million a year to producers, but in the context of a total State and federal government take of $15 billion annually, it is considered immaterial and does not make the changes necessary to alter investment behavior and increase oil production.
Depending upon various assumptions, analysis of Parnell’s bill (HB 110) indicates it would reduce taxes by $1-1.5 billion per year at a time when the state is forecast to have a $2.9 billion revenue surplus next fiscal year, and has built up reserves of $15 billion. The governor has cited industry statements committing billions of dollars in new investments if the tax structure is changed along the lines of HB 110. By comparison, the Senate proposal would reduce taxes by a fraction of the amount in the Governor’s bill, at a time when total State revenues are forecast to be almost $8-10 billion per year.
A state consultant told senators last month during committee hearings that tax levels in Alaska make the economics of new projects “very challenging.” The consultant said the effects of the Senate’s bill would be “negligible” at attracting investment and boosting production at current oil prices.
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