Alaska voters will decide next month whether to raise taxes on Alaska’s largest oil fields.
Ballot Measure 1 — dubbed the “Fair Share Act” by its sponsors — is an initiative that supporters say would fix Alaska’s oil tax law and fill the state’s deficit. But those opposed argue it would lead to less investment in Alaska and jeopardize the state’s economy.
In short: The two-page ballot measure is contentious and complicated, with each side citing its own set of facts.
As the Nov. 3 election approaches, here’s some of what we do know about the ballot measure and, if it’s approved, how it could impact Alaska.
What would Ballot Measure 1 actually do?
It would amend some of Alaska’s oil tax law.
Ballot Measure 1 would apply solely to North Slope oil fields that have pumped more than 400 million barrels and that are still producing more than 40,000 barrels a day.
Right now those are Prudhoe Bay, Kuparuk and Alpine. The main oil producers at those fields are ConocoPhillips, ExxonMobil and Hilcorp, which bought BP’s North Slope assets.
If voters approve the ballot measure:
• The oil companies at those three fields would pay the state more in production taxes. That’s in part because the ballot measure would eliminate a per-barrel tax credit for those three larger fields.
• The documents that companies submit to the state to calculate those production taxes would become “a matter of public record.” Right now, those documents are confidential.
• A so-called “ring fence” would be created around the three oil fields, which would bar the companies from reducing their taxes on those larger fields using deductions earned at smaller fields.
Who’s backing the ballot measure?
A group called Vote Yes for Alaska’s Fair Share that’s chaired by Robin Brena, an Anchorage attorney.
Others listed as officers of the group include: Jane Angvik, a former Anchorage Assembly chair and former member of the commission that wrote the charter for the Municipality of Anchorage. Former state Rep. Les Gara, an Anchorage Democrat, is also supporting the ballot measure alongside Anchorage Democratic Sen. Bill Wielechowski and Ken Alper, who worked as director of the state’s tax division under former Gov. Bill Walker, an independent.
The group recently reported raising about $1.4 million from about 700 donors. The largest chunk of that money has come from Brena himself.
And who’s fighting Ballot Measure 1?
OneAlaska—Vote No on One, a group that’s getting almost all of its money from oil companies. The group is chaired by Chantal Walsh, former director of the state’s Division of Oil and Gas under Walker.
Its other leaders include former state Rep. Jason Grenn, an Anchorage independent, Crawford Patkotak, chairman of the board for Arctic Slope Regional Corp., Kara Moriarty, head of the Alaska Oil and Gas Association, and Bill Popp, head of the Anchorage Economic Development Corp.
The group has raised a ton of money so far: about $18.5 million. It’s major contributors are Conoco, Exxon, BP and Hilcorp. The Alaska Chamber is also running attack ads against the measure and has raised about $2 million more from Conoco and Hilcorp.
Why did initiative backers bring forward this ballot measure now?
Because of Alaska’s budget crisis, says Vote Yes for Alaska’s Fair Share. “Ballot Measure 1 is the only revenue option that can be implemented in time to save Alaskan jobs,” the group says. It says the ballot measure would help pay for schools and “save the PFD.”
Meanwhile, OneAlaska counters that the ballot measure would lead to fewer oil jobs, jeopardize new projects and only fill a small slice of the state’s budget hole. It says the ballot measure supporters can’t dictate where the revenues would go, and the measure goes too far.
How much additional revenue would Ballot Measure 1 bring into the State of Alaska?
It’s hard to say for sure, said Mouhcine Guettabi, an associate professor of economics at the University of Alaska Anchorage. That’s because calculating new revenue requires assumptions about both the price of oil and the amount of oil produced in the future, he said.
“Uncertainty around price, uncertainty around the production response and, obviously, uncertainty around future investments — all three of those things make it difficult to know exactly what the amount is,” he said.
The state Department of Revenue has provided a window into what revenue might look like if oil production stays the same next fiscal year, and if companies’ investment doesn’t change. With prices at $45 a barrel, production taxes would total $191 million under the current law and nearly triple under Ballot Measure 1, growing to $564 million.
That’s a little more than half of Alaska’s current deficit, which is roughly $1 billion, but less than a fourth of the deficit if lawmakers decide to pay a larger Permanent Fund dividend under the historical legal formula.
How would the ballot measure, if approved, impact oil and gas companies’ investment in Alaska?
It depends on who you ask.
Moriarty, the campaign manager for OneAlaska, said there’s no question that higher taxes would lead to less investment and less drilling in Alaska, and have dire impacts on the industry that underpins the state’s economy. Conoco has threatened that if the ballot measure passes projects like the Willow discovery on Alaska’s western North Slope would be delayed.
“Oil companies have a hundred other places that they can invest their money. And they won’t leave Alaska right away, but they just won’t spend more,” Moriarty said. “Things will start to die off here. And they’ll go move somewhere else, and they’ll take their employees with them.”
At Vote Yes For Alaska’s Fair Share, campaign manager David Dunsmore said the state cannot subsidize the oil and gas industry any longer. Senate Bill 21 — a controversial piece of legislation passed in 2013 that cut oil taxes — is not working, he said. Oil companies will still make money in Alaska even if they pay more taxes, he said.
“It’s still going to be a very profitable place for them to continue doing business,” he said.
Guettabi, the economist, is less sure. He said the question of how sensitive oil production is to tax changes is one of the most studied questions in economics, “and we don’t really have a definitive answer.” It’s especially hard to study the potential impacts of Ballot Measure 1 in the middle of a pandemic, with multiple business sectors struggling and with low oil prices, he said.
“It just makes a messy situation even messier,” he said.
And what about making more documents public and ring fencing? What do the two sides say about those?
Dunsmore, with Vote Yes For Alaska’s Fair Share, said Alaskans deserve to see the information in the documents so they can make informed decisions about managing the state’s natural resources. That includes details about how much in profit oil companies are making, he said. He said ring fencing will eliminate a tax loophole in SB21, and companies shouldn’t be able to take expenses from other fields to lower their taxes at the “three large, incredibly profitable fields.”
On the other side, Moriarty, with OneAlaska, said oil companies and the smaller companies they do business with will lose their competitive advantage by making expenses and pricing public. She said it’s unprecedented. And, she said, ring fencing eliminates incentives for companies to expand into an area that’s not yet producing oil, because companies are more likely to invest money when they know they can deduct their expenses from taxes on fields that are currently active.
If voters do pass Ballot Measure 1, can the state Legislature later change the language in it?
According to Alaska’s constitution, the Legislature could amend it at any time, but couldn’t entirely repeal it for two years.
Have Alaska voters weighed in on oil taxes before?
Yes. Most recently, in 2014, Alaska voters narrowly rejected the repeal of SB21.
What questions do you still have about Ballot Measure 1? Email reporter Tegan Hanlon at firstname.lastname@example.org.