Oil money — your tax, your choice

Just over a month ago Alaska’s three major oil companies were presented with a phenomenal opportunity. They could have locked down reasonable changes in Alaska’s tax structure and likely gotten the governor’s approval.

They didn’t even ask.

When Governor Palin proposed ACES, the big three lost a golden opportunity to come forward and bargain. It was their chance to accept, even though reluctantly, a change in the base tax from 22.5 percent to 25 percent and negotiate a modest windfall profit tax only at high oil prices. Instead, the big three flexed their collective muscles and brought their top executives to Alaska hoping to convince legislators that any tax increase would devastate the industry and reduce investment. Millions were spent to influence our residents to become oil lobbyists. A direct approach was abandoned in favor of a blitz.

It didn’t work.

In a single 30-day session Alaskans viewed an interesting display of bipartisan cooperation among legislators. The result is a major change in the tax formula. Additionally the state is employing professional auditors to examine oil company tax returns.

Alaskans wondered why companies that had no gas stations in Alaska bombarded us with mailers and radio, television and newspaper ads reminding us what great neighbors they are. But Alaskans also read that BP paid $20 million in fines and restitution following its decision to eliminate corrosion protection in oil lines in Prudhoe Bay. Alaskans also wondered why Exxon still owes Alaskans $2.5 billion from the Exxon Valdez spill of 20 years ago and has done nothing to move our natural gas for 30 years.

But Alaskans didn’t wonder about everything; they didn’t have to. Some things are reported by financial institutions. In the most recent quarter, Exxon earned $8 billion, BP $4.2 billion and Conoco $3.8 billion, all in just the last quarter. We know those companies are doing very well at $70 a barrel for oil, better at $80, much better at $90 and looking forward to $100 a barrel. I support corporate profits, but we heard Exxon asking for a reduction in taxes so Exxon, the world’s biggest company, could afford to invest in Alaska. Alaskans don’t object to high profits as long as we can also share the windfalls.

Now is the time for getting our financial house in order. Here are four suggestions.

1. The one-time $500 million Alaska receives from tax retroactivity should be matched with the one-time $500 million expense for our share of AGIA, Alaska’s investment in the gas line.

2. We have a huge retirement liability, around $6 billion. We need to pay $1.25 billion this first year and again in future years so long as oil prices remain high. Everything we do not pay shows up as debt for our children and grandchildren at a time when they may be getting less from our resources.

3. We also need to pay back the billions we borrowed from the Constitutional Budget Reserve, money that can be tapped in the future but only after a vote of both houses, a very high hurdle.

4. Some cash needs to address issues like public safety, roads and schools. Or, we can just do what we have always done — spend it on projects that require even more money to maintain in years following. As Governor Palin asked, what is your choice on savings? We want to hear from you. Give our governor your thoughts at www.gov.state.ak.us.

State Rep. Carl Gatto is a Palmer Republican who represents District 13 in the state House.