So, where do you stand on the proposed new law giving tax incentives to the major oil companies in Alaska? Senate Bill 21 was passed in the last session of the Alaska Legislature and will be signed into law by Governor Sean Parnell. The law creates a massive tax cut for the oil industry in the hope that it will lead to more oil production on the North Slope.
Our Governor has been aggressively behind an oil tax bill to reduce taxes for the majors for a long time. In fact, last year a bill he was pushing failed to make it through the Alaska Senate. The main argument opponents to Senate Bill 21 expressed over and over again is “What makes you think you can trust the major oil companies to make the heavy investment that will result in new and increased oil production.”
The Senate urged the oil companies to make a commitment to increase activity and investment on the North Slope, and waited many weeks for them to do so. But Conoco Phillips, B.P. and Exxon Mobil were totally silent. They made no commitments of any kind. It’s no wonder that some Senators called the bill a giveaway and a crapshoot. Where is the commitment?
On the other hand, our economy is declining in Alaska along with severe declines in the flow of oil in the Trans-Alaska Pipeline year after year. Something has to be done to reverse this devastating trend. Certainly we all are interested in seeing our robust economy come back.
Many folks are leaving our state for other oil producing areas in our country. These areas like North Dakota, Texas and California are booming mainly because of the new horizontal drilling developments in shale oil. Their costs for producing a barrel of crude oil are much lower than ours and North Slope producers in Alaska simply cannot compete in the marketplace.
Senator McGuire summed it up well when she told senators that “One thing we know for sure is that the driver in investment is fiscal policy, and when we, as those that govern, have been told time and time again that our fiscal policy is not competitive and broken, it is absolutely incumbent upon us under the Alaska Constitution to make every effort we can to change that tax policy in a way to encourage investment.
Opponents are busily trying to gather 31,000 signatures from Alaskans who are against the new law, that is 10%, but that is not the only requirement. The group must collect at least 7 percent of voters who voted in the last General Election in 30 of the state’s 40 house districts. That is a gigantic task. The sad part of the effort to repeal the new law is that it creates doubt which will no doubt cause the oil companies to drag their feet until the matter is finally settled in the fall of 2014.
If Alaskans can actually trust Conoco-Phillips, B.P., and Exxon Mobil to do their part and get much more oil flowing in the pipeline then we as Alaskans have every reason to be optimistic about the future of our state. Remember, we have produced only less than half of our known oil reserves.
Think About It! John C. Davis 5/22/2013