Ballot measure has Alaskans at odds over taxes on oil producers

The measure would increase taxes for several fields on the North Slope
Published: Oct. 14, 2020 at 6:31 PM AKDT
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ANCHORAGE, Alaska (KTUU) - Ballots for November’s General Election will include a particularly divisive measure that, if passed, would directly affect Alaska’s oil and gas industry, the producers of the state’s “black gold” depended upon by so many. The primary question: Should oil producers operating three legacy fields in the North Slope be required to pay more taxes than they do now?

On its face, Ballot Measure 1 would increase taxes for big oil by altering how the taxes are calculated. The new tax would only apply to specific fields, units and nonunitized reservoirs in the state — three legacy fields in particular — which have each produced more than 400 million barrels of oil over their lifetimes and more than 40,000 barrels of oil in the past year. For other production, taxes would remain the same, whether or not the measure passes, and continue to operate as they do now under Senate Bill 21.

Regarding the proposition itself, one side believes Alaska isn’t getting its fair share from the sale of its oil, while the other maintains the measure goes too far and would put the state’s entire economy at risk.

“In the last five years, we’ve had a negative production tax,” said Sen. Bill Wielechowski, a democrat out of Anchorage representing the campaign for Yes on 1. “We’ve paid companies more in credits than we’ve gotten in production. That’s not following our constitutional mandate, to get maximum benefit for resource, and it’s the lowest tax we’ve had in decades.”

Wielechowski said lawmakers have tried to fix the tax issue in the Legislature, but to no avail.

“We knew these issues were out there,” he said. “The oil thing is saying these terrible things are going to happen in the state. Yet here were are, standing in the wreckage of Senate Bill 21, in the ruins of a policy that has massively cut jobs, cut the North Slope, and caused Alaskans to lose their permanent fund dividends.”

Representatives against the measure, however, said the added taxes — especially during a global pandemic — could damage the economy and would discourage investors from coming into the state.

“Who will suffer? It really won’t be oil companies,” said Alaska Oil and Gas Association’s Kara Moriarty, an advocate for No on 1. "At the end of the day, they won’t leave on Nov. 4, but they will just stop investing more. They’ll have opportunities elsewhere.

“We’re not the most profitable place to do business,” she continued. “So who suffers if Ballot Measure 1 passes? Alaskans, and the 1,000 businesses we do business with that don’t have other opportunities to go to.”

The Alaska Division of Elections' explanation is only two pages long, but the proposition would deeply alter how some of Alaska’s largest oil producers do business, changing the oil and gas production taxes for several fields on the North Slope that host some of the state’s biggest investors.

With the added tax clauses, advocates have said the measure could raise upwards of $1 billion per year, but opponents dispute that claim: Low oil prices, such as those seen in recent months, means Alaska would likely receive less than half that amount in 2021. The Department of Revenue estimated that full implementation of the tax law would take at least a year, according to the DOE.

The measure would also require companies to disclose their profits and the taxes they pay. That information is currently kept within the companies, something opponents claim protects competitive business information.

Additionally, companies could not develop new fields and deduct those costs from the taxes they pay on the legacy fields, which is currently allowed.

“Ballot measures may be well-intended,” Moriarty said. “But when you’re talking about complex tax policy, ballot measures are not the right tool.”

Wielechowski said the back and forth by oil companies and supporters has no ground to stand on.

“The oil industry promised jobs, and then cut jobs instead,” he said. “They have very little credibility on this issue.”

More than 39,000 Alaskans petitioned to get the measure on the ballot this year, according to a statement in support of Ballot Measure 1 submitted to the DOE, with proponents claiming the measure will “fairly and transparently increase Alaskans' share of oil revenues” and give Alaskans the right to know important information by making tax filings public.

A statement in opposition to the measure, however, maintains the measure “puts Alaska jobs, our economy, and our future at risk” and that “it is the wrong time to tax any industry in Alaska right now.”

Now, it’s up to voters to decide if companies need to pay more to cash in on the state’s oil supply.

Read the full text of the ballot measure by heading to the Division of Elections website.

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