In 1988, oil production peaked on Alaska’s North Slope. Almost 2 million barrels of oil a day flowed out of the fields there, and 1.6 million of those barrels were coming from Prudhoe Bay alone. 

It’s been a slow decline ever since. Today, the North Slope fields only produce 450,000 barrels a day. 

Prices have fluctuated over that time, too, but the general trend recently has been downward. Prices boomed between 2006 and 2014, reaching $120 a barrel in 2012. But they’ve slid, with a few upswings, to $40 a barrel today. 

With oil as the cornerstone of Alaska’s economy and state budget, the combination of low production and low prices has colluded to leave the state struggling to make ends meet. In the last state budget cycle, lawmakers had to use money from the Permanent Fund’s earning reserve to cover costs. 

Robin Brena, the chief sponsor of Ballot Measure 1, or the Fair Share Act, tells a slightly different story. He points to a confounding factor in all this: the state’s new oil tax regime that passed the Legislature in 2013 and went into effect in January 2014. 

In his telling, prices have declined, but state revenues would not have declined nearly as much if the tax scheme, called SB21 or the More Alaska Production Act, had not passed. 

“Senate Bill 21 went too far. It took too much. It’s proving to be the biggest resource giveaway in Alaska history,” Brena said in a debate hosted by Alaska Common Ground earlier this month. 

Ballot Measure 1, which Alaskans vote up or down on Nov. 3, is Brena’s solution. He and the measure’s other backers see it as Alaska’s chance to get a fair share of the money that oil companies make on the state’s rich reserves. 

It would raise production taxes on Alaska’s three biggest oil fields — Prudhoe, Kuparek and Alpine — eliminate a per-barrel tax credit and force oil companies like ConocoPhillips, ExxonMobil and HilCorp Energy Co. to make public their tax records from the three major fields. 

Brena, an oil and gas lawyer, has largely self-funded the measure, kicking in more than $1 million of the $1.5 million the campaign has raised. 

But opponents fear the measure would create uncertainty and slow down oil development in the state. The group opposing the measure, called OneAlaska, has plowed more than $20 million in trying to defeat the measure. Almost all the money has come from ConocoPhillips Alaska, ExxonMobil and Hilcorp Alaska. 

“Doing complex legislation like this at the ballot box is just not the way to do this,” said Bill Popp, co-chair of OneAlaska and president of the Anchorage Economic Development Corp. 

“It’s been drafted by a small number of individuals. … It did not go through an extensive review process. … This measure has none of that. … This is not the way to get our state back on track.” 

Brena defends the process, saying it would be next to impossible to get oil tax reform through the Alaska Legislature.

“If I thought it could be done that way, that’s the way I would have tried to get it done,” he said. 

Rep. Louise Stutes (R-Kodiak), who said she’ll vote for the measure, agreed. 

“How many of the legislators work for the oil companies directly or indirectly? You would be amazed,” she said. 

“So do you think they’re going to vote against their own paycheck? I don’t think so.” 

Alaska taxes oil companies primarily in two ways: royalties and production tax. The ballot measure would deal with the latter, which is the bigger share of state revenue, though it fluctuates more with prices. 

The current production tax structure has three major parts. One is a 4% minimum tax of gross value. Gross value is the total value of the oil before expenses. The second is a 35% tax on net production value, or profit. Third is an up to $8 per barrel tax credit that oil companies can apply based on the price of oil. 

Brena says the system has been a failure. He points to two years, 2009 and 2015, when the price of oil was roughly the same, but the tax schemes were different. According to Department of Revenue figures, in 2009, Alaska got $3.1 billion from the oil production tax. In 2015, the state got $524 million. 

Opponents of the measure cite the fact that oil prices have declined significantly as the reason for lost revenues. 

“Oil prices dropped from $108 a barrel to $43 two years later. Revenues and jobs would have dropped in any tax regime,” economist Rodger Marks said during another debate on the ballot measure hosted by the University of Alaska. 

Ballot Measure 1 would raise the minimum gross tax to 10%, and that could increase to 15% based on the price of oil. It also would eliminate the tax credits entirely. When oil profits are about $50, those profits are taxed at 50% rather than 35%. 

“Ballot Measure 1 increases taxes no matter the price level,” UAA professor Ralph Townsend explained while introducing the proposition at the Common Ground debate. 

“At low levels, it increases the minimum tax from 4% to 10%. At mid-price it increases the tax because the per-barrel credits are gone, and at very high prices it increases the taxes because of this additional progressive step.” 

A Department of Revenue report modeled the impact of the measure in the first year, should it pass. With oil prices at $45 a barrel, about where they are now, it would raise an additional $373 million, a 200% increase. If oil prices rise to $75, it would bring in more than $1 billion. 

These revenues, of course, would be a welcome addition to state coffers. The measure’s detractors worry about the effect in the long term. 

It could, for one, dissuade further investments in Alaskan oil fields. 

“Investment money in any industry is looking for some certainty on tax policy. This is the eighth attempt at tax policy change in the oil and gas sector in the past 15 years. … That is not offering a very stable environment,” Popp said. 

It might also chill further development in other areas, choking off future revenues. Marks pointed out that ConocoPhillips, the biggest producer in Alaska, has a number of fields they are working on but have not tapped, such as Willow, Narwhal and Greater Mooses Tooth 2. 

“If the initiative passes, ConocoPhillips, I suspect, will hit the pause button on these,” he said. 

Marks also said that producers in Alaska face higher transportation costs and production costs relative to other places in the world. 

Brena counters by pointing to ConocoPhillips’ $1.5 billion earnings in 2019 in Alaska alone. There’s also a 2018 report from the Legislative Research Services, which provides Alaska lawmakers with information, about how much ConocoPhillips made in Alaska relative to the rest of the world. 

In every year between 2012 and 2018, the company made more in Alaska on a per barrel basis than it did anywhere else in the world. In 2015 through 2017, ConocoPhillips actually lost money in the Lower 48 while making money in Alaska. 

Also, the new taxes would only apply to the three major fields, those producing more than 40,000 barrels per day. He said that would keep the measure from hurting new explorers.

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