The Petroleum Profit Tax (PPT)

I am pleased a bill was introduced and welcome the opportunity to reform our broken oil tax system.  I am studying this complex piece of legislation, and want to assure you that I will not support any oil tax bill that does not meet the following five principles:

#1:       It must be fair for Alaskans and for the oil companies

Every generation of Alaskans faces its own version of Wally Hickel’s immortal question, “who owns Alaska?”  Our constitution demands that Alaska’s natural resources be developed “for the maximum benefit of the people.”  We must not regress to a colonial mindset that allows major outside industries dictate to us how our resources will be developed and how much money we will receive for them.  Every expert including the administration’s own oil consultant, Dr. Van Meurs, recommended a tax rate between 25 and 30 percent.  The eleventh hour change to 20 percent is very troublesome.

Right now, oil prices are at or near historic highs.  This may not always be the case.  Under the proposed PPT, by Dr. Van Meurs’ own estimates the state would actually lose money if oil prices go below $27 a barrel.  British Petroleum has stated publicly that they make so much money at prices over $20 a barrel that they just give it back to their stockholders as surplus profit.

#2:       It must be flexible for tomorrow’s conditions

We must be careful not to commit ourselves too far ahead.  We cannot know what new resources will be discovered, what world prices will be, and what Alaska’s needs will be.  Our constitution prohibits us from contracting away our power to tax, and the administration has not adequately explained its proposal to contract away this right for 30 years.

#3:       It must promote new exploration

I support the idea of offering tax credits for exploration and new capital investment.  This is the key to our economic growth for the future.  It is essential we craft these provisions so they are not abused, only Alaskan investment is covered, and we target this benefit at the small and marginal fields that need it.

#4:       It must be an open process

We as the Legislature must have the ability to amend this draft bill to do what is best for Alaska.  I am concerned with whispers that this is some sort of a package deal and there will be political pressure on the majority to pass it relatively untouched.

Now that I have read the bill, and watched the early testimony in the House and Senate Resources committees, there are literally dozens of questionable provisions needing further examination.  I will work for an open and full examination of all these provisions.

#5:       It must encourage an Alaska Gasline

The oil tax bill is being sold as the final obstacle to a gasline contract.  Whatever we do on oil taxes, at the end of this session we must have firm commitments to build a gasline soon.