U.S. Sen. Lisa Murkowski, along with the North Slope Contractors Association and the pipeline trade unions, held a press conference on Friday afternoon to urge voters to vote against ballot measure 1 in August. The measure would repeal a recently passed oil-tax overhaul, and would revert it back to ACES, the system that was passed during Sarah Palin’s tenure in Juneau.
Murkowski, the eight union reps and contractors all said basically the same thing: The future of Alaska is at stake. Under the new regime, the state stands an economic chance. Under the old regime, it doesn’t.
“At end of the day, what oil tax reform was all about was ensuring that we have good strong jobs and a good strong economy in the future,” Murkowski said.
The unions and the contractors represent thousands of workers, and because the union vote is often a Democratic vote, it was likely the biggest show of bi-partisan support against the measure to date. The Alaska Democratic Party, and most Democratic lawmakers and candidates support repeal. U.S. Sen. Mark Begich, who’s undoubtedly the titular head of the party, said that he’ll remain neutral, as will the Alaska AFL-CIO, and likely the teachers union.
Passing ACES, then the years’ long fight to change it to the current structure, and now the fight to revert back to ACES, has been energy sucking and grueling, to put it mildly. Those who support repeal say that the old system gave Alaska its fair share of oil revenue at long last. Those who oppose it talk about how the system, which took more as the price of oil increased, has been stifling investment in Alaska’s aging oil fields.
One side has the money. The other side has the passion and idealism. From both sides numbers are proffered. Charts are presented. Experts saying one thing. Other experts saying another. It goes on, and on.
Although the intensity has risen, the nub of the issue isn’t new. Alaskans have been arguing about oil taxes since Prudhoe Bay, the largest oil field in North America, was discovered in 1968. Some might even say it’s been consumed with the issue. And as time has gone on, and as the state has relied more on oil tax revenue, the arguments have become increasingly divisive.
This is what happens when an issue morphs from simply an issue into a symbol. When that happens, each side chooses their own facts, and they sit in their corners and refuse to budge. Alaskans know this well. Think ANWR. Think Pebble, which was fast becoming the next ANWR. Think ObamaCare.
In all of the arguments about oil taxes, only a few things are absolute in the debate: Oil production has dropped from its peak of 2 million barrels a day in 1989, to about 550,000 today. The state’s general fund is about 90 percent reliant on oil money, and when it gets more money, it spends more money. Every Alaskan gets a check every year because of oil, and we don’t pay any state income or sales tax. There is nothing in the foreseeable future that will replace oil as Alaska’s economic driver. Those are the facts.
The questions: Why is production declining so precipitously? Will lower taxes help? Is the state being taken advantage of by the oil companies? Are we getting our fair share?
The fight doesn’t seem all that complicated to the union members who showed up at the press conference to urge a “no” vote. One by one, eight of them, some of them awkward in front of the mic, stood up and tried to tell the story from their point of view, which is basically this: Business is good and getting better. And if the oil companies go away, so do jobs. They spoke of hundreds of new jobs now that oil taxes have been reformed. They talked about having hope. They talked about the next generation.
Alaska state Sen. Hollis French, who is one of the most vocal proponents of repeal, and pro-union, questioned the veracity of the members. “I think they’re getting squeezed by the industry to support this,” he said. He said the he knew this based on some conversations that he’s had with business managers in Fairbanks.
Vic Fischer, a chair of the repeal effort, went further. Fischer is quoted in the Anchorage Daily News commenting about union support: “We’ve got the support of 50,000 Alaskans who signed the petition, and they are supported by large corporations who are afraid of losing the sweet deal they got from the administration.” Fischer helped draft the state’s Constitution that was ratified in 1956. Throughout the years, he’s been front and center in the oil tax battle.
In other words, nothing the union members, or any other group, can say to sway either of them. They’re sticking with the symbol.
The oil companies have their own symbol too. And one of them is Alaska. When they’re negotiating taxes elsewhere around the world, they use Alaska’s production decline as a cautionary tale of what happens when an oil province raises oil taxes. They point to the boom that’s going in other areas with tax regimes that they find more business-friendly.
At the press conference, Murkowski told a story about visiting the North Dakota oil fields and about how people knew her there. They knew her because they were Alaskans. The same thing, ‘honest to God,’ happened when she went to Midland, Texas.
“This was not a good thing,” she said. “I know those Alaskans in North Dakota and Midland, Texas, would much rather be here where their families are,” she said. And then she talked about how the “real rub” was that California was beating Alaska in production. “California? Really?”
Perhaps the oil tax change won’t matter. Perhaps it won’t make a difference, and regardless of the tax structure, oil production will continue to decline as rapidly as it would otherwise. Perhaps North Dakota, and California were bound to overtake Alaska’s oil production.
Or maybe not. The oil companies and their allies have told Alaskans that this new tax regime will help stem the decline, and if we revert back to the way it was, production will continue to decline rapidly. And Alaska will once again be used as an example of what happens to an oil regime that doesn’t play nice.
It’s not a bad positon for them to be in. For them, it’s win-win. They’ve got other opportunities, other futures. We don’t. We’ve been too busy fighting over oil taxes to create other futures.
Contact Amanda Coyne at amandamcoyne@yahoo.com
He was a fill in guest on the Bernadette and Berkowitz show just over a month ago where he stated the he was supporting the repeal. Perhaps this was his personal view and not that of the AFL-CIO, but he did not make that distinction as I recall. I will search for the podcast and reference it if I am able to locate it.
I made a mistake. Should have read proponent. Fixed. Thanks for pointing that out.
John. The AFL-CIO is staying neutral.
The words she used were repeal proponent, not opponent. Completely different meaning.
Vince Beltrami is curiously silent on this issue. Calling for repeal on numerous occasions, it seems he has now been told to stay quiet on the issue. I would be interested to know where the AFL-CIO stands on this issues now that so many unions in Alaska have come out to say NO on 1.
Amanda is a skilled quisling. But, she made an error by referring to Hollis as a “repeal opponent”.
I believe posts like this and the self-referencing comments are what is now called “native advertising”.
Willing innocents. Alaskans are so much smarter than this crowd gives them credit for.
As a Republican that recognizes that Alaska is an “owner state” and also that the state constitution specifies that resources are to be managed for the maximum benefit of the people, I will most definitely be voting Yes on 1. And I believe that would put me in the same camp as Hammond and Hickel if they were here today to vote.
It is troubling the misleading statements by the various No groups. The North Slope oil decline has been going on since 1988 and is a function of geology. Were their decline rates even adjusted for shutdowns? Where is an example that shows reduced taxation increased production in an aging elephant oil basin? Remember the “No decline after 99” ads? There was no turn around and that was in the ELF (next to zero tax rate) fiscal system days. The North Slope legacy fields are entering the 2-3 % natural parabolic decline curve rate common in elephant fields. But the “no” group wants you to believe that SB 21, which has only been law since the first of the year is already miraculously slowing the decline. Another false statement is that Alaska has the highest tax rate in North America. In addition, anyone that touts the base rate was raised to 35% is being fooled or fooling you, because the per barrel credit, drops that rate.
Or that somehow because North Dakota and Texas have had a production boom, which is entirely because of non-conventional shale oil and technological advances in accessing shale oil, Alaskans should lower our share of revenue for our conventional oil.
The aging processing facilities on the North Slope are maxed out and that has created a bottleneck that is a substantive obstacle to even putting more oil into TAPS.
The Gleason decision determined 6-7 billion barrels of proven reserves in our legacy fields and those are barrels that are technically recoverable, legally deliverable and economic to produce. That’s about 5.5 years to put 1 billion barrels thru TAPS at 500,000 barrels per day. We aren’t running out of oil, it’s a $20 billion a year operation and jobs are required for that big of an operation.
What some say, we leased it so it’s not our oil! Show me an oil executive that would claim that remark.
There’s a few extra drill rigs there this year? Well investment has grown every year for at least the last 7.
As an owner state we should demand to be treated fairly as shareholders and not to accept, be gamed, or be coerced into accepting negotiations that subject our worldwide oil commodity to be notably less profitable than our leaseholders. To keep SB 21 a few years to “see if it will work” is perpetuating a significant loss of revenue from the economic areas of the North Slope and towards a self induced income tax. Not just Yes, but an emphatic YES ON 1. Here’s to your legacy Wally and Jay.
“August 19th”
Great story Amanda. Very fair.
If we give all our state revenue away, we’ll be forced to live on less, which will make us better people. Vote NO on 1.
Though I signed the petition to Repeal SB 21, I am now taking a position of voting NO on #1. Alaska needs to present a stable and disciplined fiscal environment. We have had enough economic chaos and reckless spending. We need to stabilize the tax structure. We need to make sure we all cast an informed vote for Alaska’s future on August 9th.
So funding about 90 percent of state government for the past 35 years and helping to establish a $50 billion sovereign wealth fund and over $20 billion in various budget reserves isn’t sufficient? If the oil companies weren’t here, where do we get the revenue to fund state and local governments?
And where do you think we would get the energy to heat and power your home, business, and schools?
Alaskans should be saddened with the raping of our lands and the immense degredation caused by oil and mining extraction. Can you imagine how wonderful, how beautiful Alaska would be if we eliminated resource extraction? Unfortunately, our greedy politicians wanted money instead and sold away the state’s purity to outside corporate interests. So, if you want the money, then let’s tax them and tax them hard. After all, the oil companies are destroying our state’s envirobment. VOTE YES ON #1. Let’s make the oil companies pay for what they are doing to Alaska.
Mike V.,
Do you realize that SB 21 eliminated massive credits and deductions that we gave to the legacy producers? Do you know that by reinstuting ACES we will return to a system that subsidizes 80 percent of Exxon, BP, and Conoco’s capital projects on the North Slope?
SB 21 lowered rates but it also eliminated credits and deductions. It is not a MASSIVE giveaway. It created a more sustainable system.
The pro-Yes on #1 campaign’s arguments are ridiculous. They say,”its our oil”; but, its not – — we “sold” them leases, maintained a royalty share and tax them. Consequently, to say “its our oil” is false and misleading. Next they say, ” stop the 2 billion dollar giveaway” which is nothing more than a made up number that’s not true. Most of the advocates for repeal are clueless and can’t even cite a fact or know what percentage the oil companies get after taxes even.
The media tends to promote the Yes on #1 campaign, especially the morons that run the Alaska Dispatch. What the hell does the Alaska Dispatch know about making money or economics? All they do is lose money and are supported by some crazy left-wing rich lady. Its time we bring sound economic arguments to the table and cut the rhetoric and innuendo. Let’s debate the issue with facts, not myths. Thiis article was balanced and fair. I wish more media outlets tried doing this.
The oil companies bought themselves a legislature, financed one of their lobbyists for Governor, and then proceeded to have them pass and sign into law a massive tax cut that sent Alaska swimming into a sea of red ink.
The funhouse universe so-called conservatives in this state live in where charging a fair price to extract state-owned oil is bad and letting the extractors name their own price is good is simple economic serfdom.
The oil company surrogates can copy and paste all the talking points they want, but it does not change the fact that Alaska is being ripped-off by the oilies under SB21.
PS: There is a simple reason why Begich isn’t taking a public position on SB21: why would he want to provoke unlimited SuperPAC money raining rockets on his head when it’s not a federal issue?
Another aspect of this debate is how unbalanced the press coverage has generally been. While virtually every article from the Dispatch lets us know that the Governor worked for ConocoPhillips, I have never seen any article explain why the Governor changed ACES. No journalist, for example, will discuss how SB 21 not only reduced tax rates but also eliminated credits and deductions. Under ACES the legacy producers essentially got 80 percent of their capital spend back, which means for every $2 billion they spent on capital projects, the state was paying for about $1.6 billion. SB 21 changed that – the legacy producers now get 35% back – so on that on $2 billion capital spend the state is saving about $900 million.
Why won’t Dermot or the other Dispatch writers tell the public that by restoring ACES we are going back to this unsustainable system? Has Hollis or Bill or Vic ever told their supporters that if we go back to ACES we are going to give Exxon over $2 billion for the remaining costs at Point Thomson?
While I will vote “NO”, I fully understand SB21 is yet another “crap shoot” brought to you by the current Alaska political majority and Governor who might want to consider a membership in Gamblers Anonymous.
Isn’t this classis gambler addiction behavior on the part of the State? Spend all your immediate revenue, and your children’s savings, as you continue to throw money down on schemes and promises hoping for “your ship to come in”, while ignoring the inevitable results of your conduct.
How rare is the Alaskan today who believes in both resource development and fiscal constraint?
I’m going to vote to protect the value of my home. I’m going to vote to insure that our education system will be funded when my 3 year old is in high school. I’m going to vote to insure a healthy economy. I’m voting No on #1.
I grew up on a farm in Iowa. The way I look at Ballot Measure #1 is that we can tighten our belts a few years for the benefit of creating a sustainable economy or we can be greedy, geab it all now and destroy the economy of the state. As my Daddy would say if he were alive today, “it would be like eating your seed corn.” Let’s’ support SB 21 and build a sustainable and long term economy.
Amanda, never quite thought of the issue the way you laid it out; but, I really think that you’re right. We don’t have a lot of choice but to vote no. Repeal isn’t a plan or even hope; rather, it simply is trying to squeeze every last nickel out of a declining flow. Already we are seeing the benefits of SB 21 – – new investment, jobs and already a slight and growing production level. New companies like Armstrong, Hillcorp and Repsol will be good for the North Sloppe and our state’s economy. I feel confident that SB 21 will work and if not we control all the power of chanfing the tax code. It would be downright dumb not to give SB 21 a chance.
I’m an angry Democrat. I am diaappoointed that Democrats are urging the repeal of SB 21. This isn’t based on economics; rather, it is based on emotional anger. Listening to the Democrats makes me want to scream. Their plan shows a complete lack of understanding of real world economics. It’s time to send most of them packing.
Thoughtful post. You make a sensible and good argument for voting No on #1.
Vic Fisher’s quote didn’t make any sense to me. Not sure what he was trying to say. Further, Hollis French’s comments seemed bitter. This is about economics, not partisan politics. Disappointed that so many Democratic leaders have made this partisan. Makes me have all the more respect for Democrats like Bill Sheffield and Tony Knowles.
I’d like to thank Lisa Murkowski and the union leaders for taking the time to lend their support in defeating Ballot Measure #1. SB 21 is beginning to work and the real results will be reaped in 5 – 7 years. The Democrats advocating repeal are unfortunately being punitive and espousing meaningless slogans. I’m disappointed that Mark Begich refuses to tell Alaskans where he stands on this issue. Typical Begich, always hedging his positions at the expense of Alaska. Again, my gratitude and respect to Senator Murkowski.
Thanks Amanda for the thoughtful piece. One fact that shouldn’t be overlooked is the amount of activity occurring on the Slope. We saw a record amount of drilling this winter,, we are seeing production declines finally stabilize after years of 4 to 7 percent declines, and we are seeing a lot of new companies investing. It’s odd that the press isn’t picking up on the fact that April to June production is actually exceeding what we saw in 2013.
Another fact that is often overlooked is that SB 21 is the highest production tax in North America and is the second highest in state history.