AJOC EDITORIAL: Democrats loved credits, until they didn’t
Rep. Les Gara, D-Anchorage, and former Democrat Sen. Hollis French once boasted about spending $540 million on them in a single fiscal year.
As a candidate, Gov. Bill Walker said he wanted to use them on the North Slope the way they’ve been used in Cook Inlet.
Sen. Bill Wielechowski, D-Anchorage, touted them as a way for the major Slope producers to reduce their tax liability.
Revenue Commissioner Randall Hoffbeck called them investments in the future.
The Legislature’s consulting firm told them May 10 that eliminating them would be a “trade-off” between saving money and losing future private spending.
We’re talking, of course, about oil and gas tax credits offered by the state to incentivize development in one of the most expensive and challenging places on the planet to operate.
With the state in a $4.1 billion hole for the upcoming fiscal year beginning July 1, the Legislature has ground to a halt wrangling over the credit expenditures that are going to cost about $775 million no matter what changes are made going forward.
Republicans who fought through elections and a referendum defending their vision for tax policy and incentives have tucked tail and run over the issue as Democrats who supported these very incentives have been allowed to bank on the public’s amnesia over their past statements and ride on their tried-and-true playbook of demagoguing the oil companies.
In a 2010 op-ed, French and Gara wrote the following about their preferred tax policy known as ACES: “The credits reduce the tax a company owes, or, in the case of a company with no production, the credit can be sold. There is big money involved here: in fiscal year 2009 the oil industry made over $2 billion in capital investment in Alaska that resulted in $540 million of tax credits that lowered their overall tax burden.”
That’s right. Gara, who all but alleges oil executives are running around knocking bread out of Oliver Twist’s mouth, was bragging about the state laying out $540 million in credits, or about as much as would have been appropriated this year had Walker not vetoed $200 million in credit appropriations last June.
In 2011, Gara wrote another op-ed in which he stated that he proposed to “increase our tax credits for new exploration on the Slope, and for new processing facilities needed to put new oil in our pipeline.”
Under ACES, and before Senate Bill 21 repealed its overly generous 20 percent cap-ex credit, the state paid out $918 million in credits during fiscal year 2013 while French was a leader of the Bipartisan Senate Majority.
This is the law the Democrats fought to bring back in 2014 and the one they pine for to this day.
Here’s what Pat Forgey of the Juneau Empire reported in 2011 from Wielechowski’s defense of ACES: “The future of the North Slope is these smaller, wildcat companies, he said. Those incentives are available for any company, and the big producers such as ConocoPhillips Co., BP plc and ExxonMobil Corp. can lower their total tax rate by spending more on exploration, he said.”
You read that right. Wielechowski, who can’t finish a sentence without saying the word “giveaway” was advertising ACES credits as a way for the insidious big three producers to lower their tax obligations to the state.
Walker, who started this whole “conversation” with his veto last summer, said this at a Rotary Club debate on Oct. 28, 2014: “We need to level the playing field so smaller companies can come to Alaska. It’s very expensive to do business on the North Slope. We’re fortunate to have the large companies we do have, but we need to look for ways we can reduce the costs so it’s more economic for the smaller companies to come to Alaska, create jobs, create opportunity and drill for oil. We need more wells drilled outside the legacy fields to get more oil for the pipe.”
Holding diametrically opposed positions on a major policy issue within the space of a year or two is generally something the press finds newsworthy, but not many members of the media have bothered to hold Walker or Democrats accountable for their past statements — and votes — as they pound Republicans and the oil companies for supposedly trying to take away the Permanent Fund Dividend to line some fat cats’ pockets.
The credits under ACES were a way for Democrats to pretend they appreciate the mammoth contributions to the state economy from the oil and gas industry by claiming they supported small companies and incentivizing exploration with credits while bagging on the easy targets of the major multi-nationals who pay virtually every government salary in Alaska including the minority members of the Legislature and Walker’s anti-oil administration.
It’s no surprise politicians would cynically exploit the current fiscal state for their own gain, but it has been a useful exposure of the Democrats’ hypocrisy on the issue if anyone would bother to notice.
Andrew Jensen can be reached at email@example.com.