With numerous uncertainties surrounding the state’s new oil tax structure, a University of Alaska Anchorage researcher some call an objective voice tried to answer those questions Thursday.
A roomful of Alaskans joined Dr. Scott Goldsmith, a professor at UAA's Institute of Social and Economic Research, at the Dena'ina Center in Downtown Anchorage. At a public event sponsored by the Resource Development Council, Goldsmith cast doubt on the foundations of the campaign against Gov. Sean Parnell's Senate Bill 21.
“Every morning my rooster crows and then a little bit while later the sun comes up. So it's obvious the rooster makes the sun come up,” Goldsmith said.
One of Goldsmith's key points was a rebuttal to SB21 opponents who call the bill's effects a $2 billion annual "giveaway" to the oil industry. Two of the most prominent campaigns pushing for SB21's repeal, a question which will be placed before voters in August's primary elections, call for Alaskans to “repeal” or “stop” the giveaway.
But Goldsmith says the amount opponents are referring to is neither as big as they claim, nor is it a direct result of the new tax structure. Goldsmith referred to the debated $2 billion deficit as part of a pie representing the use of oil tax revenue, something that also reflected the state Department of Revenue’s forecast for 2014.
“Some of the drop was the drop in income tax and royalties, so that has nothing to do with the change in one production tax regime to another,” Goldsmith said.
A $300 million piece of the pie represents tax credit cashouts under Alaska's Clear and Equitable Share, the state's previous oil tax structure, but Goldsmith says the overwhelming majority -- some $1.29 billon -- is due to ACES itself. According to Goldsmith, if ACES had remained in effect for the entire year, the projected revenue for the production tax would drop a considerable amount.
“Without enhanced product, future tax revenues could be higher under SB21 than ACES if recent price and cost trends continue,” Goldsmith said.
Opponents of SB21 say it doesn’t matter what caused the deficit, which they say is an amount they predicted. What matters is what happens when the oil price goes back up.
“The bottom line for anything is profit margin on a barrel of oil,” said Ray Metcalfe, with Stop the Giveaway. “Their profit margin on a barrel of oil in Alaska is higher than their profit margin on a barrel of oil anywhere in the world. “
Goldsmith says his research reveals that, under reasonable future market conditions, a modest increase in oil investment would create more state revenue under SB21 than under the old tax system.
Proponents of SB21 are glad to have some analysis to back the bill up in the face of opponents' statements.
“They can say anything, honestly, but what we have is an expert, someone who has a long history of analysis on important policy issues," said Willis Lyford, a member of the Vote No on 1 campaign. "And he's weighed in and said the future is good under this new tax structure.”
Vic Fischer, chair of Vote Yes! Repeal the Giveaway, released a statement Thursday night countering Goldsmith's position. He says the $2 billion figure cited by SB21's opponents is still valid, based on the projected depletion of the state's savings before lawmakers approved the bill last year.
"The Legislature took that amount of money from the savings generated by the previous tax regime, ACES," Fischer wrote. "At that rate, the $16 billion savings account will be depleted in eight years or less."
Fischer also questioned the underlying premise of SB21, saying it rewards existing production rather than creating an incentive for exploration.
"What Alaska needs is a tax structure that increases exploration for new sources of oil and gas, not just provide incentives to pump the oil they are contractually obligated to produce," Fischer wrote.