OPINION: Of ants and grasshoppers
Winter is coming, and the grasshoppers are knocking on the ants’ door once more.
A two-page rewrite of the production tax code was filed as a voter initiative on Aug. 16 by the usual suspects made up of former Gov. Bill Walker’s anti-oil buddies Robin Brena and Merrick Peirce, Walker’s Tax Division director Ken Alper and one-note Democrat fiddle players Sen. Bill Wielechowski and former Sen. Joe Paskvan.
Singing the tired old song of “Alaska’s Fair Share” that could be covered as Disney’s “The World Owes Me a Living,” the group is promising its measure would tax the producers by at least an extra $1 billion per year, or nearly a 40 percent increase over the approximately $2.6 billion they paid in the just completed 2019 fiscal year.
To put that in context of North Slope operations, $1 billion is roughly what ConocoPhillips spent to build Greater Mooses Tooth-1, which started producing last fall, and another $1 billion is what it is spending right now to build the sister project GMT-2 scheduled to start producing this winter.
According to ConocoPhillips’ most recent second quarter financial report, the company’s Alaska profits so far this year have been matched nearly dollar-for-dollar on what it is spending to bring GMT-2 online in addition to ongoing exploration work at the nearby Willow discovery that has the potential to produce 100,000 barrels per day or more and will cost several billion dollars to construct.
Rather than work to get Alaska’s own financial house in order, this short-sighted grasshopper coalition is aiming to tax the stores of the North Slope ants and gorge itself on the future.
Like Aesop’s fabled layabout, the state strummed away its savings over the past five years instead of reforming the budget. Inspired by Walker and his vetoes of tax credit payments and the Permanent Fund dividend, the Legislature followed suit time and again to solve its cash flow problems not through structural changes but by simply not paying the bills.
Enabled by the Supreme Court decision that it could ignore the PFD formula, the Legislature’s failure to address the issue has poisoned the budget process as its members pick and choose which laws to follow. The failure to pay the tax credits forced Caelus Energy to sell out to the majors and helped send Furie Operating Alaska into bankruptcy.
While the major producers were losing billions of dollars from their upstream operations, they did not come to the state asking for a cut in the gross minimum tax or relief from their royalty payments.
Instead they worked to find efficiencies. ConocoPhillips slashed its dividend by two-thirds to save cash. They not only kept producing oil but increased throughput while at the bottom of the price trough.
And, finally, they kept exploring, invested billions of dollars with scant available capital to bring new projects online and made major discoveries that promise to add hundreds of thousands of barrels to the pipeline in the near future.
For all that foresight and prudence, their reward after absorbing years of losses is only to have the grasshoppers come calling with demands for another billion dollars per year.
In the original version of Aesop’s fable, the ants tell the grasshopper to go dance the winter away.
In Disney’s Silly Symphony adaptation, the ants take pity on the irresponsible grasshopper and after he is nursed back to health he changes his tune.
After bailing out the state for years with no corresponding sign that any lessons have been learned, the ants have every right to tell Brena, Wielechowski and the rest of the grasshopper gang to grab their fiddles and get to steppin’.
Andrew Jensen can be reached at [email protected].