Reporter Jim Malewitz of the Seattle Times yesterday provided a fair and balanced summation of the history that led up to the passage of SB-21 and much of the controversy surrounding it. US for Palin naturally is against SB-21 because it contravenes Alaska’s Clear and Equitable Share (ACES) as passed by the state’s former governor Sarah Palin and was one of her core accomplishments.
According to US Department of Energy statistics, Alaska ranks fourth in oil production behind Texas, North Dakota, and California in that order. As we’ve chronicled in our coverage of Alaska Governor Sean Parnell’s three-year-long war on ACES, Alaskan oil is located in some of the most remote and inhospitable terrain on the planet, combined with very short seasons in which exploration can be conducted. It can take up to seven or eight years to drill a well in Alaska versus nine months in Texas. Further, production is on the decline in existing fields, because they are being depleted.
Under SB-21, oil companies will be taxed at a flat 35% on their profits. There will be no capital expenditure tax credit to provide incentive for new exploration. The cap-ex credit was one prong of ACES, and energy companies did use it, particularly the smaller ones. Under ACES, the tax on oil profits was progressive ranging from 25% when oil prices were low to over 50% when prices were high.
Malewitz covered both sides of the issue: Gov. Parnell who pushed SB-21 under the belief that will encourage investment, competition, and production and those who support ACES, seeing SB-21 as a giveaway and a gamble. Alaska developed a $16 billion surplus under ACES. Under the Alaskan State Constitution, the people of the state own the mineral resources. He discussed the revenue shortfall that will result and how it could harm the state. Malewitz also referenced the conflicts of interest among the legislators that presided over the passage of SB-21.
“But a host of critics fear the worst. They call the tax plan an overt gift to Alaska’s ‘Big Three’ oil producers — Exxon Mobil, ConocoPhillips and BP. Those companies have an outsize influence on a citizen Legislature that includes two senators who moonlight for ConocoPhillips (the Senate bill passed 11-9, with both of them voting yes),” Malewitz wrote.
One critical item not discussed in our prior coverage, but reported by Malewitz is the possible closure of the Trans-Alaska pipeline. If too little oil traverses it, the pipeline could freeze, causing it to be shut down. He cited a US Energy Information Agency report which said this scenario could unfold as early as 2026.
Though Alaska is a difficult market to break into, it is extremely lucrative once there. Alaskan crude sells for $25 per barrel more than North Dakotan oil, Malewitz reported.
Two groups: Vote Yes! Repeal the Giveaway -which Malewitz covered – and AKBackbone are fighting SB-21. US for Palin covered both Stop the Giveaway‘s referendum effort and AKBackbone’s protests in prior reports.
H/T Lynda Armstrong, “The Teacher’s Daughter: a Tribute to Sarah Palin” Facebook Group for story lead.