Let’s make good decisions

Those pressing for an oil tax increase would have Alaskans become like the cowboy who turns to his longtime partner and says “Stick ‘em up.”

Their intentions might be good, assuming they simply want Alaskans to receive a fair share of the proceeds from its oil. That might or might not be a valid assumption since many people would like to punish the oil industry just for being the oil industry.

That latter motivation especially bugs me since I have often worked with and for the industry since my first days in Alaska 50 years ago. I know its leaders to be upstanding people whose concern for the citizens of Alaska equaled my own. Many lived here for years and came to love the place.

Some folks may be suspicious of industry leaders’ motivations and there is probably nothing I can say to convince them. But it’s important for all of us to understand that jacking up the cost of doing business in Alaska can and will discourage future investment by those businesses. And that investment is Alaska’s lifeblood.

Alaskans have been hit hard by the economic fallout from the worldwide pandemic. And we seem certain to see more damage from that ongoing disaster in the years ahead. But the big hunker-down has also damaged the oil industry.

Driving is greatly reduced from its normal levels and oil consumption is far below normal levels. At one point, because storage capacity was full throughout the nation, oil was priced at levels somewhat below zero. Though I doubt that anyone got it free and was paid to haul it away, the price drop caused investors to scramble toward alternative investments. Prices have risen since then but are still low by historic standards.

Industry has stuck with Alaska throughout the turmoil because the oil is here. And though our reserves are far lower than they were in years past, this state still has a promising future. To achieve that potential it will be important that we be cautious in our tax policies and remember that future investment by oil companies very much depends on the decisions we make when times are tough.

We should bear in mind that our competition is getting very active with incentives. Wyoming is looking at cutting its oil severance tax by 50 percent. But Alaska will be voting in November on an initiative to increase production taxes on North Slope oil, with the amount varying according to price and volume.

Alaska should get the best price it can for the oil beneath its lands and waters. It has done that for several generations and the benefit to our people has been immeasurable. One small but enjoyable sign of that benefit is the $60 billion or so balance in the Alaska Permanent Fund, a balance that could play a critical role in alleviating the economic pain of the wrenching world economy in the years ahead. It is a marvelous cushion to have, one that few states can boast of.

This spring the oil industry in Alaska employed more than 10,000 people, many of them committed citizens of this state. And those jobs tend to pay very well.

If this state continues to make good decisions about things like oil taxes, there is a strong likelihood that the industry will continue to invest in development here. Our oil reserves are not what they were 50 years ago — a lot of oil has gone down that pipeline and been shipped to markets in many parts of the world.

But we have enough oil left in the ground to keep production going for many years to come. And beyond that we have huge gas reserves that could potentially provide thousands of jobs for our children, our grandchildren and generations beyond that. Gas has many hurdles to cross before it can become a viable commercial proposition. But while waiting for those challenges to be met we have a lot to work with to support our economy for those who come after us.

Given the possibilities and the risks it will be important that we keep our wits about us and make good decisions.

Tom Brennan is an Anchorage columnist and author of five books. He was a reporter/columnist for The Anchorage Times and an editor and columnist at The Voice of The Times.