Oil Tax Heavyweights Spar At Packed Debate

It was standing-room only at an Anchorage debate on whether to keep the new capped oil tax rate or to switch back to a system where the rate goes up along with the profits. It was an unusually large – and even occasionally rowdy – crowd for the subject matter. But with voters deciding how they want to manage the bulk of the state’s revenue in less than a month, the stakes are high.

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Even after turning dozens of people away, the Alaska Common Ground forum on Wednesday night was still close to violating fire code.

The two-hour debate had State Senator Bill Wielechowski (D-Anchorage) and economist Gregg Erickson making the case for repealing Senate Bill 21 on one side. That law was passed last year as a priority of the Parnell administration, and it puts a tax ceiling of 35 percent on oil company profits.

The pair argued that tax rates historically have had little effect on oil production, and that Alaska was a profitable place to operate even when the state had a windfall system that taxed profits as much as 75 percent when prices were high. Erickson also accused the oil companies of using scare tactics by suggesting that the development of a natural gas mega-project depended on the failure of the repeal, and he recalled similar rhetoric used in 2006 when voters considered a gas tax initiative.

“The oil companies, particularly Conoco Phillips, paid millions of dollars for ads that said, ‘You pass this initiative folks, and there’ll never be a gasline,'” said Erickson. “Well, voters of Alaska took that to heart and declined to pass that initiative. Folks, we still don’t have a gasline, and they’ve been telling that same thing every time we proposed a change in the oil tax regime.”

The opposing side was represented by oil and gas consultants Roger Marks and Brad Keithley, who countered that tax incentives can encourage production and in turn bring in more state revenue. Keithley explained that the ACES tax system had a “Robin Hood” effect – redirecting state money from proven oil fields to areas that may not be profitable to produce.

The pair was also asked to explain why the oil companies were spending more than $10 million to defeat the referendum. The audience skewed in favor of the referendum, and Keithley’s response was met with some skepticism from repeal-friendly attendees.

“I don’t think the oil companies are scared. I think the oil companies realize the resource potential of Alaska. I think they realize the potential to develop additional oil in this state. And I think they see SB21 as a way that provides them an incentive to continue to bring investment to this state and continue to produce. They are investing the money in the public campaign to try to educate Alaskans on what the opportunity is,” Keithley said to some laughter. “And I would do the same thing if I were in business.”

Even after an hour and a half of the two sides going back and forth, answering questions from moderator and University of Alaska professor Gunnar Knapp and prodding each other, the audience still wanted to hear more. Knapp was only able to get to a handful of the 174 questions he said were submitted.

The oil tax referendum is one of the marquee issues of this election season. Democratic gubernatorial candidate Byron Mallott and independent candidate Bill Walker were both in the audience. Both have come out in favor of the repeal measure.

It will be put to voters on August 19.