Ballot Measure 1 gets public hearings during the pandemic with the state in fiscal crisis
JUNEAU, Alaska (KTUU) - A 2020 ballot initiative would raise taxes on Alaska’s three largest oilfields, limit how big producers can deduct expenses from their tax bills and compel major oil companies to publish some of their tax records.
“Ballot Measure 1: Alaska’s Fair Share Act” has had public hearings all week with Lt. Gov. Kevin Meyer hosting the events by telephone. The final public hearing will be held on Thursday afternoon.
Many of the callers have asked supporters and opponents of the initiative whether it would help bridge the state’s fiscal gap.
When the next Alaska Legislature convenes in January, it will begin writing a budget for the next fiscal year roughly $300 million in deficit with state savings accounts all but exhausted. The current deficit figure does not include a Permanent Fund dividend for 2021 which would cause it to balloon further.
Robin Brena, the chairperson of “Vote Yes for Alaska’s Fair Share,” says the initiative is the only way to get new revenue into state coffers quickly. Under Alaska law, if Ballot Measure 1 passes, the initiative would come into effect 90 days after it is approved by voters.
Brena believes that major oil producers need to pay more to the state from Alaska’s three legacy fields, especially with finances strained during the COVID-19 pandemic. “From our point of view, they have to pony up some money and pay their fair share for our oil,” he said.
The tax hike would be limited to major oil producers on Alaska’s three largest oilfields: Prudhoe Bay, Kuparak and Alpine.
“If we can’t get a fair share out of those fields then we’ve ruined the future of Alaska,” Brena said, explaining that the change would not impact the production tax rate paid on smaller fields.
Supporters of the ballot measure have looked at the last five years of data and estimate that the state would have collected an extra $1.1 billion per year with a higher tax rate paid by major producers on the North Slope.
With the North Slope oil price hovering around $40 per barrel, the revenue that’s raised drops significantly, but Brena says the state would still net an additional $145 million in taxes in 2021. “Ring-fencing” the state’s three legacy fields could also see the state get an extra $300 million in 2021, Brena said.
Kara Moriarty, the campaign manager for “OneAlaska: Vote No on 1,” opposes the ballot measure, and says while prices have rebounded in the past four months, a tax rise on the oil industry could be devastating. “The pandemic has created one of the most challenging times in Alaska’s economic history,” she said.
Alaska’s Congressional delegation agrees that it’s not the right time to be raising taxes on the oil industry.
“I’m voting, no, no, no and no,” said Rep. Don Young, R-Alaska, to the Alaska Chamber of Commerce’s annual meeting on Tuesday.
Sen. Lisa Murkowski, R-Alaska, speaking at the same event, said there is not enough detail or economic modeling on the initiative to know what it would do. “My sense is that those unintended consequences are going to be awful for Alaska,” Murkowski added.
The Alaska Chamber of Commerce is a contributor and supporter of OneAlaska.
According to July campaign filings, OneAlaska has raised close to $10 million with the vast majority of contributions coming from major oil companies. BP Exploration donated over $3 million in late June in addition to other big contributions to the campaign.
In contrast, Vote Yes for Alaska’s Fair Share has raised just over $660,000, according to July campaign filings. A big source of the campaign’s contributions is from Brena himself.
Both campaigns expect a tight race in November.
Moriarty said businesses and Alaska Native corporations from across the state are signing up to oppose the ballot measure. “People are realizing this is not the right decision to make at this time, especially in 2020,” she said.
Brena said the campaign in support of the measure is in front. “I’ve seen three different polls and all of them show us leading,” he said. Brena would not share the poll results themselves.
Ring-fencing Alaska’s legacy fields
In addition to raising taxes, the ballot measure would also “ring-fence” Alaska’s legacy fields. Under current Alaska law, major oil companies can invest in exploration and development on the North Slope and reduce their tax bills from what they earn from the state’s most productive fields.
“Ring-fencing” those fields would eliminate that practice, which Brena estimates would net the state hundreds of millions of dollars more per year in new revenue.
Moriarty argues that limiting how companies can deduct expenses could curtail exploration. “There’s no incentive and no ability to be able to capitalize on Slope-wide expenses on expansion,” she said.
Disclosure of tax records
A third aspect of the initiative relates to which tax records are made public by oil producers.
If the ballot measure passes, major oil companies would be compelled to disclose how much they earn and pay in taxes from Alaska’s most profitable fields. Under current law, that information is kept confidential from the public.
“We don’t even know how the major producers are doing in our own oilfields,” Brena said.
Opponents of the initiative argue that disclosing tax information for the legacy fields would also see competitive business information published which would create a negative business environment in Alaska for the oil industry.
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