Rebates for state oil

To the editor:

Our partners in monetizing oil resources are producing less oil each year. They claim it is because of the higher cost of extracting the remaining oil and the tax rates under Alaska’s Clear and Equitable Share (ACES). They suggest that lowering the taxes collected will lead to more investment in Alaska by those oil producers. They do not, however, offer specifics or guarantees.

Many legislators do not want to give tax breaks resulting in lowered revenues to the state without firm commitments of increased oil production that would generate additional revenues to the state that would, at the very least, offset any tax reductions given.

My suggested solution would be a rebate program. This would not change existing tax structure. It would give a rebate when increased oil production targets are achieved. When the current rate of about 600,000 barrels per day reaches 650,000 barrels per day, then the producers get a rebate from the taxes they paid.

At current rates, 50,000 barrels per day brings in around $666 million. A rebate of — as just an example — a real number to be negotiated of $250 million would gross the state $666 million in revenue for the additional oil, thus netting just more than $400 million after “giving” the producers the rebate. Increases of every 50,000 barrels per day would earn additional rebates.

At the suggested rebates, when oil production reaches the 1 million-barrel-per-day level, producers would earn a total of, what a coincidence, $2 billion.

Producers have to guarantee nothing. The state needs to make no changes to existing taxes and can do this by statute as the rebate is no change to taxes, but is instead a budget expense to be paid if and when production increases are met.

If the main producers want monetary help from the state to help offset higher production costs, then this allows them an opportunity to get it the old-fashioned way — earn it.

If this makes more sense to you than what is being achieved by the Legislature, I suggest you save this and contact your legislators and advocate they adopt this proposal.

James Garhart

Wasilla