Some call Senate Bill 21, signed into law last year reducing taxes on the state’s oil companies, a giveaway -- but others say it will revive a stagnant industry in Alaska.

Four weeks from Tuesday, voters in Alaska’s Aug. 19 primary elections will decide the fate of Ballot Measure 1, which seeks to repeal SB21.

Two Alaska economists, set to meet in a Wednesday debate over Ballot Measure 1, agree that SB21 is spurring increased activity -- but just how much actual oil production it’s spurred remains up for debate.

In 2007, the Alaska Legislature passed then-Gov. Sarah Palin’s oil tax regime, Alaska's Clear and Equitable Share. The ACES production taxes, featuring a progressivity system that increased tax rates at higher oil prices, were replaced in 2013 by SB21.

A few months later proponents of repealing SB21, including elder Alaska statesman Vic Fischer and former Alaska First Lady Bella Hammond, gathered more than 40,000 signatures -- enough to trigger a repeal vote for the law in next month's primary.

Some say numbers don't lie, but economists Gregg Erickson and Roger Marks have come to different conclusions on whether SB21 will fill the state's coffers with oil revenue.

Erickson says under ACES, if a barrel of oil’s price rose from $130 to $131, Alaska would get about 90 cents of that extra dollar. He says the government's take is much less under SB21.
“At higher oil prices, the state loses big-time because of SB21 -- but at much lower oil prices, the state might actually make money under SB21,” Erickson said.

To Marks, ACES’ progressivity discourages investment when prices rise. He says tax credits on new or old oil production will help offset the stepped-up taxes oil companies pay when the price per barrel spikes.

“The problem with ACES is it generated very high tax rates at high prices, and so it made it made it difficult for producers to make money when oil prices went up,” Marks said.

The base tax rate on each barrel produced increased to 35 percent under SB21. The new law also eliminates progressivity, establishing a competitive review board.

“Most international jurisdictions where Alaska competes, they don't have progressivity,” Marks said. “So if you want to compete, you really need to be consistent with international norms.”

But Erickson says oil prices continue to rise, although a long-range forecast by the state projects that they will eventually level off. He says the state will lose quite a bit of money under the new law.

“The oil companies didn't do much to make that price rise from whatever it was to the new higher price, so it doesn't make much sense for them to collect much of the windfall that comes from those higher prices,” Erickson said.

Passion raged on both sides of the issue when SB21 was placed on the ballot for repeal. Now supporters and opponents who plan on voting only have a few weeks to decide on an issue that could affect Alaska for years to come.

Erickson and Marks will be presenting their data, alongside state Sen. Bill Wielechowski (D-Anchorage) and oil and gas policy consultant Brad Keithley respectively, at Wednesday's debate on SB21. The event starts at 7 p.m. at Anchorage’s Loussac Library.