Initiative filed seeking $1 billion tax hike on oil industry
A group of Alaskans has launched an effort to put a measure before voters asking them to increase taxes on the oil industry, as the governor moves to close the deficit with large cuts but no new taxes.
Oil companies and an industry trade group swiftly condemned the effort, saying it would lead to less investment and oil production in the North Slope oil patch.
“Vote Yes for Alaska’s Fair Share” registered as a campaign group with state regulators on Aug. 19. On Aug. 16, an initiative group applied with the Division of Elections so it can collect signatures in support of a two-page ballot proposal.
The so-called “Fair Share Act” would alter the state’s 2013 oil-production tax passed as Senate Bill 21. It would apply to the North Slope’s large, legacy fields — currently Prudhoe Bay, Kuparuk and Alpine — held by major oil companies, said Robin Brena, an initiative committee member and an oil and gas attorney who chaired former Gov. Bill Walker’s Transition Subcommittee on Oil and Gas.
The measure would bring in about $1 billion extra in production taxes, he said.
“Alaskans should receive their fair share from the sale of our oil,” Brena said in a statement.
BP estimates taxes on the industry would increase between $1 billion and $2 billion, if voters approve the measure, based on an initial analysis. That would stunt investment in Alaska as companies put their money in other oil provinces around the world, according to Megan Baldino, a BP spokeswoman.
“We are still reviewing the language but the initiative appears to propose a very substantial increase in oil taxes that would make investing here less attractive,” wrote Natalie Lowman, a spokeswoman for ConocoPhillips, in an email.
The initiative effort’s other two committee members are Jane Angvik, former Anchorage Assembly chairwoman, and Merrick Peirce, a former chief executive with the Alaska Gasline Port Authority.
The campaign group’s treasurer would be Ken Alper, former Tax division director under Walker. Co-chairs of the campaign group include Sen. Bill Wielechowski, D-Anchorage and former Sen. Joe Paskvan, a Democrat from Fairbanks.
The proposal would leave the 2013 tax system in place for small and new fields.
Large prospects being pursued by ConocoPhillips and Oil Search could eventually fall under the new proposal, but it would take close to a decade of sustained production before that would happen, based on company production estimates.
“We’re trying to help the (smaller) independent companies, and we’re certainly trying to not cause harm,” Brena said Aug. 19. “The larger, more profitable fields being harvested are in a better position to pay their fair share.”
BP, ConocoPhillips and ExxonMobil are the major lease-holders at Prudhoe Bay. ConocoPhillips owns and operates Kuparuk and Alpine.
The proposed initiative comes with Alaskans gripped by a tense debate over how to close the state deficit.
Residents speaking at budget hearings this year have often called for increased oil taxes as one way to generate more state revenue. State lawmakers and the Dunleavy administration are expecting to weigh the impacts of any potential changes to the 2013 oil-production tax law in the legislative session that begins in January.
The initiative group announced the effort Aug. 19, the same day Gov. Michael J. Dunleavy vetoed more than $200 million from the Legislature’s operating budget bill.
Kara Moriarty, chief executive of the Alaska Oil and Gas Association, an industry trade group, said the measure would lead to less future oil production as Alaskan companies slow investments.
“I get it, the state’s fiscal situation is concerning and as an Alaskan, that goes for me too,” said Kara Moriarty, chief executive of the Alaska Oil and Gas Association, a trade group. “But while this can seem like an easy fix, in reality it’s bad policy and I’d argue irresponsible to put forth a policy proposal of this magnitude when you don’t know the impacts.”
Peirce, an initiative committee member, said the 2014 law isn’t working.
“The Fair Share Act will help keep more money from the sale of our oil in Alaska,” he said. “Keeping more money in Alaska will help improve our economy — which is among the worst in the United States — avoid further layoffs from Gov. Dunleavy’s budget cuts, and create new jobs for Alaskans.”
In 2014, a group of Alaskans attempted to repeal the tax system with a referendum and restore an earlier tax law that significantly increased state revenue at higher prices. That grassroots effort was vastly outspent by the oil industry, and failed at the polls.
The measure proposed Aug. 16 would make major changes to the law for the legacy North Slope fields, including:
• The gross minimum production tax, which has kicked in in recent years when oil prices are low, would increase from 4 percent to between 10 percent and 15 percent, depending on the price of oil.
• The net production tax, which has kicked in when oil prices are higher, would eliminate the per-barrel credit provided to oil producers. That would save the state about $1 billion annually, Brena estimated.
• Producers’ production tax returns and supporting documents would be public, rather than confidential as they are today.
The Division of Elections as of Aug. 19 lists three other active petitions that are at least undergoing review by the state, including to reform public education, move the Legislature to Anchorage, and to overhaul elections. A citizen’s effort to recall the governor Dunleavy is also underway, following his proposals for large cuts and other actions.
The initiative group turned in well over 100 signatures from registered voters with its application form, Brena said. The signers will serve as sponsors.
The office of Lt Gov. Kevin Meyer, who oversees the Elections division, has 60 days to review the group’s application, said Lauren Giliam, a deputy press secretary for Dunleavy, on Aug. 19. The certification deadline is Oct. 15, she said.
Meyer’s office will work with the Department of Law and the Elections division to confirm the proposed bill, application and sponsors meet requirements, she said.
If the application is certified, the initiative committee will have a year to turn in 28,501 qualifying signatures, an amount equal to 10 percent of those who voted in the preceding general election. A minimum number of signers must live in at least 30 of the 40 House districts in the state.
The group hopes to get the measure on the November 2020 ballot, Brena said.