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We are writing with respect to Senate Bill 21 and proposed changes to oil taxes. 3/22/13

March 20, 2013

Dear Senate President Huggins, Speaker Chenault, and Members of the State Legislature,

We are writing with respect to Senate Bill 21 and proposed changes to oil taxes.

The legislature is contemplating tax changes which would forgo tens of billions of dollars of revenue.  SB 21 would replace a progressive tax structure with a flat tax, while substantially changing which oil fields are eligible for tax credits.  It would eliminate legislative language designed to promote industry competition.  These are major policy changes, and would affect Alaska’s business climate and state budgets for decades.

For decisions of this magnitude, it is critical that you act based on complete information, including robust estimates of forgone revenue, projected budgetary impacts, and, if applicable, anticipated new oil production.  Sweeping tax changes for the product that is responsible for 90% of State revenue must be considered with the utmost care. 

It is imperative that any legislation on oil tax policy produce public benefits which correspond to and offset forgone revenue.  If the public will lose revenue from oil produced on public lands, then the public and the legislature should have complete confidence that such tax cuts will produce correspondingly large increases in oil production.  Anything less fails to meet the standard set out by Article VIII Section 2 of the Alaska Constitution, which mandates both that the legislature develop our resources and that the public derive “maximum benefit” from production.

Generations of Alaska leaders—Governor Egan, Governor Hammond, Governor Hickel, to name just a few—worked across party lines to ensure that the Owner State develops its resources for the maximum benefit of Alaskans.  As written, SB 21is inconsistent with Owner State principles, but we remain confident that deliberate, judicious consideration of oil tax changes can increase production while maintaining fidelity to Alaska’s Constitution and the legacy of her greatest leaders.

Bella Hammond

Chancy Croft

Jay Kerttula

Katie Hurley

Sam Cotten

John Sund

Jim Whitaker

Mike Miller (Juneau)

Ethan Berkowitz

Harry Crawford

Eric Croft

David Gottstein

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