Sit, Hollis! Bad senator!
A recent campaign ad run by state Sen. Hollis French comparing oil companies to his dog pretty much sums up everything that’s been wrong with the discussion over reforming Alaska’s oil taxes for the last two years.
“One thing I’ve learned is that you don’t give treats before she sits or stays,” French says. “Tax breaks for oil companies should be the same way.”
French continues, “They should invest in jobs and new production first, then they can have a reward.”
Forget the insulting nature of the ad and the fundamental unseriousness of it.
Not to put too fine a point on it, but French’s argument is just plain ignorant.
The Senate majority and its frontmen French and Sen. Bill Wielechowski are fond of putting out press releases touting the supposedly business friendly tax climate of Alaska, without, it seems, any awareness of the fact that oil tax revenue is the reason tax burdens on every other type of business are so low.
They also seem not to be aware, or choose to conveniently ignore, the annual Fraser Institute oil tax rankings based on industry surveys that consistently place Alaska’s onshore regime at the bottom of North America jurisdictions.
Perhaps they also missed the Oct. 23 story by the Associated Press reporting that the United States is on track to become the world’s No. 1 oil and gas producer before the end of this decade.
What was conspicuously absent from the article?
In 1,200 words, the word “Alaska” was nowhere to be found. The word “Alaskan” was present a single time, referring to booming production years from the Prudhoe Bay fields in the mid-1980s when the U.S. was producing about 11.2 million barrels of oil and gas liquids per day.
Here is the key paragraph from the article: “A long period of high oil prices has given drillers the cash and the motivation to spend the large sums required to develop new techniques and search new places for oil. Over the past decade, oil has averaged $69 a barrel. During the previous decade, it averaged $21.”
There is a simple and regrettable fact to be taken from the AP report. Since enacting ACES in 2007, Alaska has missed out on more than a half-decade of the capital investment boom in oil production.
While oil companies are investing billions upon billions in the U.S. and around the world, throughput in the Trans-Alaska Pipeline System has continued to decline despite oil producers having — theoretically — the price incentive to do more.
Unfortunately, the producers also have an incredible disincentive to produce more thanks to a ridiculously uncompetitive tax structure and a legislature that thinks of them as a pet to be commanded to beg and roll over.
It’s a shame that this attitude has even trickled into the campaign of Bob Roses, the Republican running against Wielechowski. In his latest radio spot, Roses, too, asserts that he won’t support tax reform until production increases first.
As French begs for his “treats” in the form of votes, perhaps he should first perform a trick by oh, I don’t know, actually doing something other than making silly arguments and defending the unsustainable status quo caused by declining production and burgeoning budgets.
What the state is doing to the oil companies is actually no different than overfishing, a practice Alaskans understand well as one of the catalyzing forces behind statehood.
When a resource is in decline, as North Slope production is today, you don’t take as much of it as you can before it runs out. That’s exactly what ACES does. Rather than encouraging companies to sustain and grow production, the state is greedily taking as much as possible while it can and robbing the companies of the capital they need to invest in increased production.
As the owner of two dogs, I can sympathize with French’s effort to conflate human behavior with that of his cute black lab Allie.
Also like most pet owners, that sort of feeling usually ends right about the time my dogs start sniffing the same kind of stuff that French is shoveling.
Andrew Jensen can be reached at firstname.lastname@example.org.