Lieutenant governor approves citizen ballot initiative regarding oil taxes

Lieutenant Gov. Kevin Meyer has approved a citizen ballot initiative that if placed on the election ballot and approved by voters would raise Alaska’s oil gas taxes to bring $1 billion to $2 billion a year in new revenue to the state treasury.

Meyers’ Oct. 15 action was a procedural step that allows sponsors of the initiative to begin gathering signatures on petitions.

The lieutenant governor told the sponsors in a letter that they must gather 28,501 signatures of qualified voters within a year. That will put petition gatherers will be out in front of grocery stores and other public places over the next few months.

State Attorney General Kevin Clarkson recommended approval of the application because basic procedural requirements had been met, but he also warned that the initiative, if approved, would raise a number of procedural and constitutional issues that will cause litigation.

Sponsors include former state senator Joe Paskvan, Merrick Pierce, former CEO of the Alaska Gasline Port Authority and Jane Angvik, former member of Anchorage’s assembly. Anchorage attorney Robin Brena is advising the sponsors along with former state tax director Ken Alper.

Basically, the initiative undoes many of the modifications to Alaska’s oil and gas tax laws made by the Legislature in 2013, which North Slope oil producers say substantially improved Alaska’s ability to attract new investment by the industry.

A surge in new drilling followed and new oil discoveries were made that resulted in enough new production to halt the steady decline in North Slope production. Large discoveries made recently could actually increase production.

When world oil prices collapsed in 2015 there were sharp declines in state revenues, which are mostly from oil and gas. State officials and legislatures moved to cut spending and also tapped, for the first time, a portion of Alaska’s Permanent Fund earnings to help support the budget.

There was criticism, however, that some of the changes in the petroleum tax law in 2013 went too far, and modifying these will bring in new revenues, eliminating the state’s deficit and the need to tap Permanent Fund earnings. One provision in the revised tax law singled out for criticism is an $8-per-barrel production tax credit. The initiative proposes to repeal the provision.

Roger Marks, a retired state petroleum economist, said the initiative would impose a big tax increase. “The initiative raises taxes at low prices, high prices, and in-between, Marks wrote in an Op-ed appearing in the Anchorage Daily News.

“Presently, the state alone is getting 45 percent of the net profits (from production) at current (oil) prices. It would get 64 percent under the initiative,” Marks wrote. These calculations are his own, he said, and were based on public data.

“At prices under $45 per barrel the (industry) taxpayers would lose money while the state makes several dollars per barrel. At high prices, the marginal tax rate would be 70 percent,” he wrote.=

In his Oct. 14 letter of advice to Meyer Attorney General Clarkson voiced reservations about legal issues the initiative is passed, would raise: “The language of the (initiative) bill is difficult to interpret and raises a number of implementation and constitutional questions,” Clarkson wrote.

On a purely technical basis, “The bill does not follow normal drafting conventions and does not clearly identify what statutes it is seeking to amend or create, while also stating that the new laws would go into effect “notwithstanding” any existing laws to the contrary.”

“Because of these issues, the bill may not accomplish what was actually intended by the initiative sponsors. It is also likely to lead to litigation over the meaning of various provisions and questions of equal protection, due process and the (unconstitutional) delegation of authority to the Department of Revenue.

Clarkson said, however, none of these issues amount to legal defects sufficient to deny certification of the initiative. “Instead, these are mostly post-enactment concerns,” he said. The laws governing initiatives mainly deal with whether proper procedures were followed by sponsors in the application and gathering preliminary signatures.

Roger Marks said he believes the Legislature, as chaotic as it can sometimes be, is the proper place to write and change complex laws like those dealing with taxation.

“As easy as it is to be cynical about laws that are the outcome of the legislative process … at least that process provides many checks and balances to the initial subjectivity of a single legislator that may be embedded in early drafts,” he wrote in his Op-Ed.

“For a bill to become a law it will be reviewed by a number of legislators in the initial committee, be analyzed by experts, receive public input, go on to other committees, the body as a whole (House or Senate), and go through the same process in the other body. Along the way, there are exchanges of ideas and the proposition is modified,” Marks wrote.

“In the end, it will be subject to a multiplicity of perspectives and information. The initial favoritism gets tempered. This ultimately results in decisions that are better than could have been made by any single member,” he said.