Leg with Louie: Predicting Success!

Here’s a prediction: before too long, someone out in our great state who is tired of this self-imposed budget calamity will file a citizen’s initiative to change the oil tax structure.  

The oil industry will charge this Alaskan citizen with playing unfairly - pulling the rug out from under them, not being a good partner, creating an unstable investment climate. The industry will stand to lose over a billion dollars a year if the structure is modified, so they will spend a lot, a whole stinking lot of cash on advertising to sway voters against the initiative.  

The industry will spread their message through their most feverish allies: Alaska Journal of Commerce, Alaska Business Monthly, Must Read Alaska, the State Senate, and the Dunleavy Administration. The message will be coordinated, lock-step and consistent - New Taxes are Bad for Business.  

The citizens will come up with a catchy slogan, they will create a website, form an entity that can legally receive and spend money in support of their cause. They will be outspent twenty to one or even fifty to one. But they will have a key ingredient for success on their side - terror.  Without this, there would be no real reason a normal citizen would go up against a potential 50 to 1 cash disadvantage. These citizens will go for broke because of their kids' education, and hence the future is at stake. These will be some deranged, crazy, ticked off, red-eyed, foul-mouthed and genuinely frightened citizens and they will fight hard.

In a state that is by some accounts the most profitable oil province on the planet, kids should not be stuck 40 to a class so the oil industry can pay an effective tax of about 4%. The industry that now enjoys an oil price flirting with $70 per barrel should be looking at Sean Parnell’s More Alaska Production Act subsidies with some vague sense of unease. They should rightly be looking out at the societal discord resulting from Dunleavy’s proposed “expenditures match revenues” approach and wondering, deeply, whether the statute depriving the General Fund of over a billion dollars a year in order to provide industry a sliding scale per barrel tax credit, is still, or ever was, appropriate.  

Let’s do some double down nutso predicting here: lets also predict that despite the long odds and the worthy opposition, the measure passes (I predict that many in the industry who live here will, in the quiet of the voting booth, support a reasonable change if it means the schools they send their kids to is not crumbling and overcrowded with no sports or pools or music or language offerings). If the Tax is changed by initiative to a 25% rate with limited deductions and a repeal of the sliding scale per barrel credit for legacy oil, and a repeal of the $5 per barrel credit for new field oil - will the oil industry pack up and leave Alaska because it is no longer profitable? What is your prediction?

In her excellent history on the numerous changes to Alaska oil tax policy since Statehood, Lisa Weissler, longtime AK Legislative staff and former assistant attorney general specializing in oil, gas and mining law, discusses how major disruptive events, like the Exxon Valdez oil spill, and unseemly legislative corruption scandals have served as a catalyst for major changes to Alaska’s oil tax structure. Read this eminently readable history by clicking this link. By all accounts, the Dunleavy Budget is shaping up to be another big, life-altering event in our state, and it may well be that a change to oil taxes is fated to follow.    

Louie Flora
Government Affairs Director

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Hearings to watch


Monday, April 1, 1:00 p.m. House Resources Committee: Presentation - Pebble Project status and Updating on Permitting and Environmental Impact Statement by Norman Van Vactor, CEO, Bristol Bay Regional Development Corporation, Daniel Schindler, Professor, School of Aquaticc and Fishery Sciences, University of Washington, Camron Wobus, Senior Scientist, Lynker Technologies, Rick Halford, former State Senator, and Consultant to the Bristol Bay Coalition

Monday, April 1, 3:30 p.m. Senate Resources Committee: Overview of the Alaska Department of Fish and Game Management, Allocation, and the Boards of Fish and Board of Game

Monday, April 1, 6:30 p.m. House Resources Committee: Confirmation Hearing, Jason Brune, Alaska Department of Environmental Conservation - Testimony by Invite Only

Tuesday, April 2, 8:00 a.m. House Community and Regional Affairs Committee: HB 32 AK ENERGY EFFICIENCY LOANS; ELIGIBILITY

Tuesday, April 2, 10:00 a.m. House Fisheries Committee: HB 99 NUYAKUK RIVER FALLS; HYDROELECTRIC SITE

Wednesday, April 3, 1:00 p.m. House Resources Committee: HB 27 REGULATION OF FLAME RETARDANT CHEMICALS - Public Testimony

Wednesday, April 3, 3:30 p.m. Senate Resources Committee: SB 51 NATIONAL RESOURCE WATER NOMINATION/DESIGNATION

Wednesday, April 3, 6:00 p.m. Senate Judiciary Committee:  SJR 4 CONSTITUTIONAL AMENDMENT: STATE TAX;INITIATIVE - Public Testimony

Thursday, April 4th, 8:00 a.m. House Community and Regional Affairs Committee: HB 81 PROHIBIT PLASTIC RETAIL BAGS - Public Testimony

Thursday, April 4th, 10 a.m. House Fisheries Committee: HB 65 FISH TAX: REPEAL MUNI REFUNDS/REV. SHARE

Friday, April 5th, 1:00 p.m. House Resources Committee: Presentation - “Process for the Evaluation of the Dept. of Army Application Submitted by the Pebble Limited Partnership by David S. Hobbie, Regional Regulatory Division Chief, U.S. Army Corps of Engineers

Friday, April 5th, 3:30 p.m. Senate Resources Committee:  SB 91 NUYAKUK RIVER:HYDROELECTRIC SITE - Public Testimony

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