Petitions in favor of raising oil taxes submitted

Supporters of a voter initiative to raise oil taxes on large North Slope oil fields turned in 44,624 signatures on petitions to Lt. Gov. Kevin Meyer’s office Jan. 17.

This was far more than the 28,501 needed to qualify for a place on the 2020 state general election ballot, which gives the sponsors a considerable margin in case some signatures are declared invalid.

The measure would raise taxes on the industry by $1 billion to $1.5 billion, a substantial increase, according to estimates. If the lieutenant governor now clears the measure for the ballot, which seems likely, for the state general election ballot this fall it will trigger raucous political campaigns this summer both against, and for, the proposition, a boon to advertising and public relations agencies who will be hired on both campaign.

Essentially, the proposal rolls back a major tax reform bill passed by the Legislature in 2013 that was narrowly upheld by voters in a 2014 citizen initiative to repeal it. The initiative would eliminate oil tax credits of $8 per barrel and impose higher taxes for “legacy” oil fields, or the larger, older fields on the North Slope. “It’s a massive, huge tax giveaway, for no reason at all,” oil and gas attorney Robin Brena told KTUU-TV in Anchorage.

Companies say the tax change would cripple several pending new oil projects that are within the large field areas targeted by the proposition: Nuna and Narwhal in the Alpines field; an expanded West Sak heavy oil project in the Kuparuk River field, and three new projects in the Prudhoe Bay field.

Although the tax would hit large fields, investment in smaller projects outside the large field would also be impaired, said Kara Moriarty, president of the Alaska Oil and Gas Association.

“It’s disingenuous to say it won’t have an impact on everyone in the industry because everything is interconnected, whether it’s through production, opportunities, sharing or the costs of transporting a barrel of oil,” Moriarty said.

“There’s no way any industry in Alaska, especially three companies, can sustain a tax increase of at least 150 percent or more depending on the price of oil and not have an impact on investment,” she said.

Other industry officials said the tax on large fields would curb investment to develop new discoveries, at least for some companies, because profits earned in Prudhoe Bay, Kuparuk and Alpine provide the capital for reinvestment in other projects on the slope.

The initiative comes at an awkward time. Companies have made several new North Slope oil discoveries in recent years, such as ConocoPhillips’ Willow project and Pikka, a find by Oil Search and Repsol. While engineering and permitting is underway on developing these discoveries the final investment decisions have not been made.

There is now new uncertainty with the possible ballot proposition and new tax pending.

Summer and fall campaigning for and against the initiative, if it is approved, will be only the latest chapter in controversies over oil and gas taxes that have roiled Alaska politics since oil production first started on the North Slope in 1977.

The key question has always been whether the state gets a “fair share” of profits from production. Data compiled by the Department of Revenue in recent years has shown that the state’s long-term “share” or net revenues has averaged about a third, with the federal government and the producing companies sharing the other two-thirds.