Killing the Golden Goose

Photo courtesy Paxson Woebler, Flickr, Aug. 16, 2013

In his call for a Special Session of the legislature to discuss a natural gas pipeline project, Governor Bill Walker surprised all the players by proposing a reserves gas tax on oil and natural gas. Such a tax would slam leaseholders on the Alaska North Slope for not bringing projects online.

This is a bad idea. A very bad idea. Why? Because we here in Alaska are competing with all the other oil and natural gas states (and nations) for the services of companies who explore, drill, build facilities and produce that oil and natural gas for market. Alaska is a tough place to operate as we are a long way away from market; our climate is harsh; we have a rat’s nest of rules and regulations. Most importantly, state and local taxes have been changed on a regular basis for nearly two decades, all in an attempt to screw the producers out of more free money for the state treasury.

In case we have forgotten, and many of us apparently have, due to the fracking revolution, production of shale oil and natural gas has skyrocketed in the Lower 48. The world is awash in hydrocarbons – oil, natural gas and coal. More expensive wells are being shut in. Exploration is being reined significantly back. Shell is talking about withdrawing from exploration in the Chukchi Sea. Even Usibelli is shutting down coal mining through the end of the year.

Yet Walker proposes sticking it to the producers once again. How can this possibly put more product through the pipeline? From here, it appears that he is allowing his decades old hatred of Exxon over Point Thompson to trump any rational analysis of tax policy here in Alaska. He and his democrat, union, Bush and Backbone supporters now propose to kill the Golden Goose that has funded this state for nearly half a century. Given the same people also oppose mining, logging and other resource development industries (everything other than commercial fishing and tourism), it is difficult to see where the state will get revenues once the producers pack up and take their business to other, friendlier locales.

Voters statewide rejected a reserves tax sponsored as a ballot initiative by democrat Eric Croft in 2006. The vote was 65% in opposition. Croft did all the economic damage possible to the state economy while in the legislature and took his act on the road to the Anchorage School Board where his has presided over an ever increasing and unsustainable budget. His most recent “success” was passage of school bonds here in Anchorage that the legislature can no longer afford to reimburse. He now hopes to bring the same economic illiteracy to the Anchorage Assembly.

The producers are our business partners. We don’t have to like them. We don’t even have to tolerate them. All we have to do is treat them the same way we want them to treat us. Every single one of us would be infuriated by a bank that changes terms of a mortgage or auto loan every time it gets in a bit of financial difficulty. Why is it acceptable to puff out our collective chest, raise our fist in the air, shout “Alaska First!” take up pitchforks and torches and go after the producers on a whim?

It is little more than sophistry. And Walker, his backers and his media cheerleaders know it. Hopefully the legislature knows it too so they can summarily reject this foolish and dangerous proposal.