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OPINION: Oil tax reform a big step in the right direction

April 19th, 2013 | Tara Sweeney Print this article   Email this article  

The Alaska State Legislature recently passed legislation reforming the oil tax structure in this state, and it is a good step in the right direction.

The oil tax reform debate has been the main attraction, taking center stage in the political arena in Juneau for more than three years now. We have seen many attempts for reform and several failures to come to a reasonable compromise in previous years. This year, the legislature took a big step in the right direction, creating an investment climate that is tied to production. This critical element was absent in ACES and in previous proposals.

No one is entirely happy, but industry and the legislature can live with what passed; that's the definition of compromise. In the end, our House and Senate delegation, Rep. Ben Nageak and Sen. Donny Olson, took a hard look at the issue and made the right choice for Alaska, and especially rural Alaska.

From ASRC's perspective the passage of SB 21 is a good thing. You can find copies of our testimony and letters on our website at, and I encourage you to take a look at why passage of this bill was so important to our corporation. Let me share with you a few reasons why.

There were two versions passed in the legislature, the Senate version and the House version. The Senate version passed first, and in that version of the bill the government-take was lower.

This meant that there was less money available from the industry for the State of Alaska to conduct business. In the previous ACES and the Senate version of the bill, companies paid no taxes at low oil prices, and the per-barrel credit was lower- which, again, meant less available money for rural Alaska. Despite Sen. Olson's opposition, this bill version passed the Senate in an 11-9 split, and was transmitted to the House.

After several hearings in House Resources, this committee introduced a committee substitute that made the North Slope more attractive, in terms of investment, for small producers, independent explorers, majors and companies like ASRC. The bill was transmitted to House Finance, where additional modifications were made. These modifications made the bill satisfactory to the industry, and better for rural Alaska.

What I mean by "better" is that the House version linked the Community Revenue Sharing Fund directly to Corporate Income Tax. This fund was established to share the benefits with our communities; the more corporate income taxes paid by industry participants, the more available money there will be for this fund and ultimately for the benefit of rural Alaska. Next, the House version requires the State of Alaska to collect more revenue at higher prices, which again, could mean hundreds of millions of dollars more available for rural Alaska.

There are provisions in the House version that also create a better investment climate for companies like ASRC to invest into the production of even marginal fields. Further, there are provisions that stimulate the fabrication and construction (manufacturing) sectors of the industry.

While I do not speak for the North Slope Borough, I have observed that their tax base is centered on infrastructure within the boundaries of the North Slope. This bill links incentives with production, and with production comes additional infrastructure- a boost to the North Slope Borough's tax base.

For all of these reasons and more, it was important to pass this bill. ASRC, the ANCSA Regional Association, Ahtna, Doyon and NANA all testified in favor of passage of SB 21 before the House Finance Committee. Equally as important is to acknowledge that Rep. Nageak and Sen. Olson recognized the improvements made to the Senate version of the bill as it moved through the House process. Rep. Nageak voted for the improved version on the House side, and to his credit, Sen. Olson changed his vote to support the House version on concurrence.

This was a tough vote.

There are grumblings of a citizen referendum on this issue, and adding a layer of uncertainty through that process will only stall potential projects and more oil coming down the pipeline. With declining throughput and revenues, can we really afford that as a state? I doubt it.

Those that are quick to criticize fail to see the potential of how this positively impacts rural Alaska and our shareholders. Increased available revenue for rural Alaska means increased available funding for programs that directly benefit our people. Increased investment translates into increased activity- where we trust there will be an uptick in employment and project opportunities; those have a direct impact on the daily lives of our shareholders either in terms of work or dividends.

A leadership role in any community is often difficult, and one has to weigh many factors when faced with a tough decision. This was one of those times and I am thankful for the leadership demonstrated by Rep. Nageak and Sen. Olson.

Tara Sweeney is the senior vice president of external affairs for Arctic Slope Regional Corporation?


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