ANCHORAGE – The current tax law, Senate Bill 21 (SB21), hurts Alaska most when the price of oil drops. “With dropping oil prices, Alaskans can no longer afford to subsidize multinational companies producing oil from our largest and most profitable oil fields,” says Jane Angvik co-sponsor of the Fair Share Act initiative. Currently, Alaska gives an $8 per revenue barrel credit, or $1.1 billion per year, for oil produced from Alaska’s three largest and most profitable oil fields: the Prudhoe Bay Unit (Prudhoe), the Kuparuk River Unit (Kuparuk), and the Colville River Unit (Alpine). The Fair Share Act would eliminate these excessive and unnecessary subsidies for multinational companies.
When oil prices drop, the current tax law under SB21 makes an already bad situation even worse. Not only do we get less revenue because the price of oil drops as we continue to subsidize multinational companies, but we also get less revenue because our percentage share drops under SB21. As the pie gets smaller when oil prices drop, our slice of the pie gets even smaller yet because of SB21. As a result, our revenue drops almost twice as fast as the price of oil. The last time the price of oil dropped 62 percent, our production taxes dropped 109 percent under SB21.
As Robin Brena, co-sponsor of the Fair Share initiative observes, “When the price of oil drops, Alaskans’ risk is greater and our share of the oil revenue is less than any other major oil resource owner in the world.” When oil prices dropped in 2016-17, for example, ConocoPhillips lost $4.6 billion in the Lower 48 while it made $1.8 billion in Alaska. ConocoPhillips made money in Alaska while losing it in the Lower48 because under SB21, Alaskans bear much more of the downside risk of dropping oil prices than do owners of the oil in the Lower 48.
“Vote Yes does not believe Alaska can afford to continue taking so much of the downside risk of dropping oil prices while continuing to subsidize multinational companies with $1.1 billion per year in unnecessary corporate welfare,” says Merrick Peirce, a co-sponsor of the Fair Share initiative. The Fair Share Act sets our minimum production tax at 10 percent for the three largest and most profitable oil fields. It requires the multinational companies producing our largest and most profitable oil fields to manage commodity price risks in lower price oil environments, just as they are required to do in the rest of the world. If you want to be treated fairly when the price of oil drops, support the Fair Share Act!
Please go to voteyesforalaskasfairshare.com to learn more and help pass the Fair Share Act.
Members of the press with questions may contact the Vote Yes For Alaska’s Fair Share campaign team at firstname.lastname@example.org.