Sides Argue For And Against Changing Oil Taxes

Oct 5, 2020

In 2018, Ballot Measure 1 failed to pass, which had much to do with the business-backed campaign, Stand For Alaska. This election season, the tax on oil companies is up for reconsideration.
Credit Bill Roth / ADN

Alaska's Ballot Measure 1 would change the state’s oil taxes to increase the amount that oil companies pay, and reduce the deductions that they can take, among other things. Opponents say that it will hurt the industry and that’s not good for Alaska. Chantal Walsh is the campaign manager for One Alaska, a group opposing the measure. 

Walsh is a petroleum engineer and managing partner of Petro-technical Resources of Alaska, or PRA, and former director of the Oil and Gas Division during the Walker administration. She said that the proposed tax changes would eliminate oil company profits, adding that increasing taxes together with eliminating tax credits for exploration and development would destroy the industry’s future. She points to the impact the global decline in oil demand has already had on oil industry jobs.

“And personally, at PRA, we’re at 20% of our capacity,” said Walsh. “We’re having to spend down savings to keep our doors open. And all of those big splashes that we saw in the news about these new oil finds, we’re right on the verge of these companies spending the kind of money for infrastructure that will bring that oil to the TAPS pipeline. But we need the kind of policies that encourage investment. Now is absolutely not the right time to enact a reckless tax initiative.”

Supporters of Ballot Measure 1 question how much good the oil industry is doing for Alaska. They point to statistics indicating that the majority of the people who work in the industry live out-of-state. They say that the real benefit is the revenue the industry brings to Alaska’s state coffers, which pays for everything from schools, roads, and basic services, to Alaska's Permanent Fund. Jane Angvik, a sponsor of the ballot measure, said that revenue from the oil industry has declined significantly since the legislature changed the tax structure six years ago.

“Before that, Alaska got about $12 billion a year of income from the sale of our oil,” Angvik explains. “After the law changed we dropped down to less than $200,000. So we’ve lost our money. There’s less revenue by between one and $2 billion per year. And one of the other aspects of the law that was passed is that we gave them what is called a tax credit. For three years out of the last five, we actually paid more in tax credits than they paid Alaska in taxes.”

Opponents of changing the state’s oil tax structure, like Walsh, say that changing taxes is complicated and should be done by the Alaska Legislature. They also argue that Alaska needs the oil industry, and should ensure that Alaska remains competitive on the world market by being consistent in its tax policies.

“And we see constant changes in oil and gas taxes,” said Walsh. “I think we would have a stronger oil and gas industry here in Alaska if we just held on to the policies we have. Then people know what they’re playing with and against.”

Supporters of Ballot Measure 1 counter that since the 2014 changes in state’s oil taxes, which were supported by the oil industry, the Alaska Legislature has refused to look at the issue again. Angvik said that there is no choice but to use the state’s initiative process, and that’s why the state constitution gave people the power to write laws.

“This is our law. The legislature has refused to even hold a hearing on this law or any other element of that since 2014. They are very heavily influenced by oil company lobbyists. And what this is is the citizens rising up to say, 'We are not getting our fair share,'” said Angvik.

Any initiative passed by voters only stays in effect for two years, but lawmakers could wipe it out by passing a similar law, which would not have that limit.

Interviews with Walsh and Angvik on the program “Coffee@KYUK” can be heard on the KYUK website.