This opinion piece, written by Jim Plaquet, a 46-year member of the International Union of Operating Engineers Local 302, appeared in Sunday’s Fairbanks Daily News Miner.
It turns out that Joe Paskvan and I actually agree on some things: Alaska needs fiscal stability; Alaska depends on the oil industry as its major source of revenue; Alaska has suffered a recession in recent years; and Alaska has faced the stark reality of budget cuts. The rest of the story told in his recent opinion piece, however, is woefully incomplete and misleading.
The “bad thing” that happened to Alaska in 2015 was the massive collapse in global oil prices, not the passage of a new oil tax system (SB21). Alaska depends on oil for the large majority of our state revenue, so oil prices mean more to us than any other state. Between 2014 and 2016, oil prices dropped from $108 to as low as $26 per barrel and stayed low until about 2018. Had we still been under the previous ACES tax framework Joe loves to talk about, it’s hard to imagine what our state might have looked like during the downturn. Because of the way SB21 is structured, companies paid more at low oil prices under SB21 than they would have under the old tax system. I realize this in an inconvenient fact for Joe and his allies.
Among all the campaign rhetoric, it’s important to remember that SB21 actually increased the base tax rate on oil companies from 25% to 35%. The per barrel credit, which increases as oil prices decline, and decreases as oil prices increase, is what keeps Alaska competitive with other oil regions. Without it, we don’t stand a chance. It also results in a progressive tax – as profits go up, the companies pay at a higher effective tax rate. Joe tried comparing Alaska to Texas, but that’s like comparing king salmon to hooligan. As it is, transportation and production costs add up to over $15/barrel more in Alaska than in Texas. At a price of $50/barrel, taking 30% of the market price in taxes leaves Texas producers with $17/barrel profit after costs, but in Alaska it would leave them with only $2. Big difference.
Oil companies have options, and they will go where they get the best return on their investment. Under ACES, we saw record high oil prices, but with a high tax rate on top of already high costs, Alaska couldn’t compete. North Slope production declined as investment went elsewhere, and we lost our spot as the country’s second largest oil producer. Alaskan oil-field workers left for states like North Dakota, while our unemployment rate at times was higher than the national average, and we saw scary headlines like “In U.S. Energy Boom, Alaska Is Unlikely Loser.” I don’t want history to repeat itself, and I don’t think most Alaskans do, either.
Speaking of history, we can’t forget Joe’s story on the PFD. When oil prices were high, the Alaska legislature, including then-Senator Paskvan, burned through cash as quickly as it came in. When prices crashed, the legislature dipped into savings and kept spending, which unsurprisingly led to a massive budget shortfall. That tactic doesn’t work for a household budget, and it definitely doesn’t work for a state budget. That is the one and only reason Governor Walker reduced the PFD. Legislators are telling tall tales and hoping we have short memories, but Alaskans are not easily fooled.
This year has been one for the books. Every sector has been hit hard, and all of us are feeling it. I don’t understand why Ballot Measure One proponents consistently mislead voters, or why they think raising taxes by as much as 300% on our most important industry is wise policy right now. I love Alaska, as I know Joe does, as we all do. Pushing an ill-conceived ballot measure using misleading and inaccurate information does not serve Alaskans. My neighbors are smarter than that, and I am convinced they will see through the deception and vote no on Ballot Measure One.