Brennan: Let’s quit foot-shooting
By Tom Brennan |
If Alaska voters approve the proposed tax boost on the oil and gas industry next November they will be shooting themselves in the foot once again.
Some estimates place the proposed tax increase on our best existing fields at 200 percent. I was an English major and can’t guarantee the math, but I’ve been working in Alaska for 52 years and have seen the effects of such foolish public policy again and again.
Passing such a tax increase next November would weaken this state’s economy at a very delicate time. The older oil fields are in their declining years but great potential still remains, both in the older fields and newer ones yet to be tapped.
We have large oil deposits and vast amounts of natural gas that could be developed and provide the foundation of the economy for decades to come — provided we don’t do something stupid like jacking up taxes.
We also have a new generation of industry leaders moving into key positions, people who are responsible for making decisions for their companies and investors that can make all the difference in Alaska’s future. As the older generations turn their operations over to new managers, our state grows ever stronger as long as we keep our heads.
My old company, ARCO, became part of BP in 2000 and BP is now selling its Alaska interests to Hilcorp, a company best known for taking over older oil and gas prospects and reconfiguring them for a prosperous future. Hilcorp, ConocoPhillips, ExxonMobil and others like them are the best hope for a continuing strong economy.
The restraint Alaskans have exercised has shown very positive results. Drilling activity in the last year has been the highest in 20 years.
Alaska did away with its individual income tax in 1980 and is the only state that has neither an individual income tax nor a statewide sales tax. Instead we get an annual dividend check, our individual share of oil and gas state revenues.
That is a very unusual situation and we might or might not be able to avoid paying a share of government costs forever. Keep your fingers crossed on that one, folks, because the cost of state government inevitably rises. Governor Mike Dunleavy has done a commendable job of reducing the budget burden and hopefully that will continue.
But the most important thing we can do as individuals probably is to restrain any impulse to increase oil taxes. Major oil fields discovered in recent years are still awaiting development and gas production seems quite likely in the years ahead. Those investments will only be possible if we avoid the pernicious impulse to pick the pockets of our business partners, the companies on whom we must depend for the investments to develop those resources.
Amortizing such investments generally takes many years, so it is essential that we deal fairly with our corporate business partners, make the necessary commitments and stick with them. Most of the key agreements on taxes and royalties are already in place and what we need now is to follow through and stick with the shares already agreed to.
It is appropriate to look at those past commitments from time to time and make sure they are still functional and working in the best interests of Alaska and its people. But I have been through this many times over the years and am convinced that Alaska is getting at least its fair share.
Being faithful to our past commitments and sticking with them is essential, especially when investments in the billions of dollars are at stake.
We need to have industry spend billions more to keep the oil flowing from older fields, develop new ones and, at long last, to build the infrastructure to begin moving our vast gas resources to market.
Restraint on our part could make all the difference in the economic futures of all Alaskans.