Alaskanomics's Blog: SB21 Encourages Development and a Strong Alaska Economy
The 2014 primary election will be a truly interesting occurrence in Alaska. Not only are there a number of highly contested races on the ballot, pending final approval of the collected signatures, it looks like voters will have an opportunity to decide to keep the new oil tax structure that was signed into law with SB21 this spring. As addressed in an earlier blog post, we believe that SB21 promotes economic development and makes Alaska competitive with other oil producing states and regions. SB21 is a good thing for the Alaska economy and voters should understand the consequences of a vote to repeal the oil tax structure.
A repeal would bring a high level of uncertainty to the industry. It would be difficult for companies to make long-term investment strategies that include Alaska because they would be uncertain of future tax rates. Oil companies would be forced to look elsewhere for development. Alaska would lose vital jobs and the economy would suffer. It is important to understand that the economy does not mean only what is put into the State Government Treasury, it means opportunities for careers and investment in the private sector. Alaska needs to be consistent with its tax structure to encourage future development.
Oil production accounted for just over 90% of Alaska’s unrestricted general fund revenues in fiscal year 2012. The general fund pays for almost every state service. This includes education, infrastructure, and public health and safety. If oil production declines even faster because companies are not able to invest due to an uncertain climate, every Alaskan will be impacted. Jobs will disappear and the Alaskan economy will be devastated. Over 50% of working Alaskans are directly or indirectly dependent on oil and gas exploration and development. SB21 allows Alaska to be globally competitive in the industry and has already shown that oil companies are willing to invest in development to keep our economy strong.
The current tax reform has been vigorously debated in the Alaska Legislature since 2008. Voters made their voices heard by electing individuals on both sides of the reform debate. This is how our system works. During the 2012 election, candidates made their opinions very clear on the oil tax reform issue and voters took to the polls to show their support for their candidate. Once in office, legislators looked at all angles of this highly complex issue through research, testimony and public opinion to make informed decisions for their constituents. The decision to enact SB21 was not one that was taken lightly. It is a positive step for the Alaska economy and we have already seen an increase in investment from major oil companies. ConocoPhillips and BP have pledged an additional $4 billion in investment and development along the North Slope. SB21 is working and should not be repealed.