I do not align myself with the politics of former Governor Sarah Palin. The less I hear or read about her, the better. So in this regard, I was recently surprised to find myself grateful for reading what she had to say. The topic was oil and gas taxes in Alaska.
As you may recall, Governor Palin, riding a wave of corruption clean-up, came into office to overhaul Alaska’s oil and gas tax structure. Amidst the suspicious cloud of FBI investigations, she managed to get “Alaska's Clear and Equitable Share” passed by a strong bi-partisan majority. After a decade in which the industry paid little, if any, production tax at some of North America's largest fields, ACES provided Alaska, the actual owner of the leases, with a fair share of the oil wealth.
Then came Governor Parnell who initially was also a supporter of ACES. A December 20, 2009, article in the Petroleum News, reported that Parnell had "already discussed ACES with 10 oil companies. Of those, he said, "four to five" thought the tax system was "just fine," while "two or three" thanked the state for the tax credit program, and two companies wanted to see ACES changed." Apparently two companies wanting more was enough for Governor Parnell.
Ms. Palin returned to Alaska this May 7th to defend ACES and encourage voters to “push back” to repeal SB 21, the oil tax giveaway. "I'm happy to weigh in on this subject and let people know how wrongheaded this will be if we start caving in to those who we respect, who we partner with, that's the oil companies. But - they're doing just fine and our Constitution lays out that perfect blueprint for Alaska to be solvent and sovereign and with the use of resources that benefits the owners - the residents" claims Ms. Palin
Asked why Parnell had a change of heart, Palin said "Bless his heart. Remember that Sean Parnell came from the oil industry. He was an employee of ConocoPhillips lobbying for the cause there." Here is where I appreciate Governor Palin’s plain speaking voice. Governor Parnell was in a position to deliver for his former employer and he did. Bless his heart.
But what about the heart of who we are as Alaskans? Are we going to have a fair compensation for our leases or one structured, according to Senator Bert Stedman (R-Sitka), “as if the State of Alaska is having a going out of business sale on oil”? Are we going to act as an “owner state” as advocated by former Governor Walter Hickel and embedded in our Constitution or are we going to succumb to the enormous influence of the oil companies and act as “owned state”. When contemplating the later, let’s not forget that Governor Parnell was not the only fox in the henhouse. He had considerable help from Senator Kevin Meyer and Senator Pete Micciche, both current employees of Conoco-Phillips who votes ensured that SB 21 passed out of the Senate by one vote.
Now the oil companies are spending $12 million dollars to ultra-saturate the media to keep SB 21 in play. And why wouldn’t they? If you doubt the value of the sweetheart, no-strings-attached deal, just look at the oil company’s veracity to keep it.
Governor Parnell has repeatedly defended the giveaway rate of compensation for our oil as a way to “to spur investment and create jobs vital to arresting the oil production decline and achieving the new throughput goal.” The new throughput goal he established was 1 million barrels a day through TAPS within ten years. Yet, according to the Parnell Administration’s ten year forecast of general fund revenues, oil revenues are projected to go down significantly. This is because his own analysts know that even a huge tax break cannot change the geology of a declining field.
But what about spurring investment in new fields, what about job growth etc? It turns out that under ACES, oil company profits, oil capital investment, oil sector employment, oil exploration, and the number of oil companies conducting exploration, all were growing under ACES. This is because Alaska has higher profit margins per dollar of revenue or barrel of oil compared to the Lower 48 and other places around the world. A recent report from the Legislative Research Agency estimates that ConocoPhillips makes $28 per barrel in profit in Alaska, almost three times higher than profits in the lower 48. Executives from ConocoPhillips have also acknowledged that Alaska under ACES had "strong cash margins" and "very good rates of return" when speaking to audiences outside of Alaska. (3/23/11 ConocoPhillips investor conference call.) These comments are in stark contrast to testimony they provided to the legislature when supporting SB 21.
While modifications to ACES’ progressivity structure may be warranted, it is critical to note that ACES was never broken. It merely needed refinement. That did not occur. Instead SB 21 went overboard because those beholding to the oil industry had the power to do so. Now, thanks to 50,000 Alaskans that signed the petition, Alaskans have a chance to put people back into the equation. On August 19th in the primary election, Alaskans will have a chance to restore our constitutional right to use our natural resource wealth for the maximum benefit of the people. All they need do is vote “yes” on Proposition One and, as awkward as this sounds, do what Ms. Palin says… “push back”. The owner state lies in the balance.
Kate Troll was the former executive director of United Fishermen of Alaska