NEWS: Dept. of Revenue Reveals True Losses to Alaskans from Oil Giveaway

Rep. Les Gara

(907) 465-2647
CONTACT: Toby Smith




April 11, 2013


Dept. of Revenue Reveals True Losses to Alaskans from Oil Giveaway

Short-term spikes in oil price could be “double-whammy” to Alaskans


JUNEAU – In a letter released yesterday, the Department of Revenue released the first analysis of the potential losses to the state at high oil prices should the current oil tax giveaway proposal become law. At oil prices of $120 annual losses to the state would be around $1.6 billion and over $3 billion at prices over $150 per barrel. With this great a discrepancy between returns from the current system and the latest proposal, even short-term price increases could result in significant unrealized returns for Alaska.


“No one can predict future prices, but if global events send prices through the roof and we aren’t getting our fair share, Alaskans will lose twice—their energy costs will spike and the state will miss out on hundreds of millions of dollars,” said Representative Les Gara (D-Anchorage).


In 2008, oil prices spiked to around $140 per barrel for three months. Because of the progressive nature of Alaska’s current tax structure, the state earned $3 billion in returns on its oil during that time. Should the current version of SB21 have been in place then, the state would have lost over $1 billion dollars in those three months alone.


“Our current system is designed to let Alaska share in the windfall returns when our oil is worth the most,” said Rep. Gara. “By capturing our fair share of the unexpected returns in 2008, Alaska was able to weather the historic drop in prices that followed those record high prices. If we hadn’t gotten our fair share of the high prices, Alaska’s economy would’ve taken a beating when the prices dropped.”


The letter from the Department of Revenue also shows the fiscal impact of the various current oil tax proposals using the more modest predictions for oil production decline ConocoPhillips announced recently instead of the more exaggerated declines used by the Department of Revenue. ConocoPhillips announced that it is making investments this year that should decrease its production decline to three percent in the next three years. The Department of Revenue uses an average of a six-percent decline in its models starting in 2017. If there is a three percent production decline instead of a six percent decline, the potential loss of revenue at high oil prices is even larger should the current oil tax proposals become law.


“We need accurate information before we make this historic, multi-billion dollar decision,” said Rep. Gara, who requested the updated analysis. “If the companies predict more future production than the administration is telling us, then it calls into question not only the numbers the administration is presenting, but the whole premise of this giveaway proposal. Rather than give away money on a hope, wing, and prayer, we’ll keep sticking with the facts. Our big legacy fields make huge profits. Reasonable tax breaks should be granted for work leading to new oil.”




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