Rep. Kerttula Op-Ed: Oil tax reduction? Not before production

Rep. Beth Kerttula

Oil tax reduction? Not before production

Editorial – February 20, 2013

By Representative Beth Kerttula


Alaska doesn't have to be a company town to be a resource state. But to be a successful resource state, we must get our resources to market and get a fair return for selling them. That's why Alaska Democratic legislators put forward a proposal to spark development of new fields, squeeze more oil from existing fields, and advance non-tax ideas for getting more oil out of the ground and into the pipeline.


It's simple: Production before reduction. Our bill puts Alaska first instead of giving away billions of dollars for nothing but promises and the status quo. If an oil company puts more oil in the pipeline than they are now, they pay less in taxes on that oil.


Over the last five years, Alaska has gotten its fair share for our oil resource, paid off debts and socked away over $15 billion. We've seen record employment on the North Slope, increased exploration and many new companies coming to Alaska to drill for oil. Oil companies have made billions in profits from our oil, often offsetting losses from investments in the Lower 48 or overseas.


Those are all good things for Alaska, but the fact remains that there is more oil on the Slope, and plenty of room in the pipeline. To maintain a strong economy as we work to get even more of Alaska's oil to market, we followed three principles in crafting our proposal: It must get new oil in the line; Alaska must get something for what it gives; and Alaskans must maintain a fair return for our oil.


Getting new oil in the line means any tax changes must result in additional oil in the pipe, not simply reward oil that's already being produced. When the governor gives companies tax breaks without tying them to what Alaskans want–more oil to market–then he rewards the status quo and does nothing to get the majors out of harvest mode. We target our incentives to oil above what they're already producing. New fields, new oil from existing fields, heavy oil, those are the focus of our tax breaks.


We also advance non-tax ways to get more of our oil to market. We propose ways to advance heavy oil technology, to ensure producers don't warehouse our resource, and to partner with industry so Alaska can better share the risks and rewards of developing new North Slope oil.


Alaskans must receive tangible benefits in exchange for any reduction in taxes. Our bill targets tax breaks to performance. It requires more production before any tax reduction. A business would never enter a deal to give up cash for promises, and neither should Alaska. There is simply too much at stake.


We cannot forget, it's Alaska's oil. Unlike in a company town, all Alaskans own the resource together, and it's our job as legislators to make sure we manage the resource for the maximum benefit of all Alaskans. We cannot give it away for less than it's worth, and we cannot plunge into our savings accounts when our resource is selling at historically high prices. The oil companies will always ask for more from us, but Alaska cannot afford to sacrifice its schools, roads, energy projects and public safety just because they ask for it. Minimizing the financial impact by targeting incentives to new production protects our economy and allows Alaska to build for the future.


Committee chairmen have expressed a willingness to listen to reasonable ideas to get more of our oil in the pipe, and we will hold them to that. Our proposal is both reasonable and well-researched, and it's based on the common-sense principles of setting goals and rewarding industry for reaching them.


Please look at our proposal and let us know what you think. Oil tax discussions are too important to Alaska for the Legislature to only look at one set of ideas, and our proposal would get more oil in the pipe without breaking the bank. It should be part of the conversation.


[signed] Beth Kerttula


Beth Kerttula is the House Democratic Leader from Juneau. The Democratic oil tax alternative is HB111 in the Alaska House and the Alaska Senate companion bill isSB50.

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