Although the Anchorage-based Make Alaska Competitive Coalition, or MACC, is one of the most outspoken proponents of a reduction in Alaska’s oil production tax, it does not accept funds from oil producers.
It’s a grassroots organization made up of individuals, businesses, community and civic organizations from across Alaska. The coalition’s purpose is to “provide a unified voice to Alaskans who understand a strong business climate is essential for Alaska’s economic future.”
According to its website, http://www.makealaskacompetitive.com/, MACC’s steering committee is made up of the following individuals:
Will Anderson, Koniag Inc.
Rick Boyles, Teamsters Local 959
Carl Brady, Brady Inc.
Judy Brady
Margie Brown, CIRI
Bill Corbus, Alaska Energy and Resources
Cynthia Henry, Hops Hallmark
Jim Jansen, Lynden
Tony Knowles, Governor
Marc Langland, Northrim Bank
Tom Maloney, CH2M Hill
Harry McDonald, Carlile Transportation Systems
Bill Moran, FirstBank
Gail Phillips
Norm Phillips, Jr.
Ed Rasmuson
Rex Rock, Arctic Slope Regional Corporation
Marilyn Romano, Alaska Airlines
Helvi Sandvik, NANA Development Corporation
Bill Sheffield, Governor
Richard Wien, Florcraft
MACC’s mission is “To inform Alaskans about issues that impact our economy so Alaska remains a premier place for business opportunities now and for future generations.”
On the coalition’s Home page is a brief editorial titled, Our Economic Driver is in Decline.”
It reads as follows
“Alaska has a production problem — one that won’t be fixed by increased exploration drilling. “The pipeline is only a quarter full and the best way to keep it operating is to develop the billions of barrels of reserves in the legacy fields, like Prudhoe Bay, Alpine and Kuparuk.
“The oil is there but it will cost millions and millions of new capital to produce it. And that’s why ACES (Alaska’s Clear and Equitable Share) must be fixed.
“While exploration is vital to the long-term, developing the existing reserves is critical to keeping Alaska healthy in the near and mid-term. And those reserves fall under the production side of ACES.
“ACES offers generous incentives for exploration — and punishing disincentives for production, especially when oil prices are high.
“Alaska figured out the exploration side of the tax equation. We now need to balance the production side.
“MACC accepts no money from oil producers.”
Presentations, promises
One of the most interesting sections of its website are the presentations, including those from top executives of BP and ConocoPhillips, promising increased investment if Alaska’s oil and gas production tax law, commonly referred to as ACES, is changed.
Among the presentations is an April 2011 speech from former Gov. Tony Knowles, who combines a bit of personal and Alaska history with his support for reduced production taxes.
In regard to Knowles’ Fact #2, information about the 2011-12 exploration drilling plans of eight companies on Alaska’s North Slope were not yet public in April 2011, when Knowles made this speech.
Knowles urges change
“In 1968, after school and the Army, I was working on an oil rig in California. My employer had drilled the Prudhoe Bay discovery well and offered me a job in Alaska. Just married, Susan and I came to Alaska with the chance to live the American dream — thanks to a new state that believed in creating jobs and the private companies that took the risk of investing for development. It was exciting, and my family and I will always be profoundly grateful to the people who gave us this chance.
“And those dreams can be as real today as they have been to the thousands of Alaskans who discovered the oil, built the pipeline, and developed the nation’s largest fields. Tens of thousands of jobs, new Alaska businesses and a growing Permanent Fund have touched the lives of Alaskans in every part of our state. That’s why I have joined the groundswell of support calling for our leaders to heed the warning signs of a much harsher, not too distant future and take the necessary steps to make Alaska competitive.
“Some people are saying that times are good and revenues are up. They miss the point. The issue is not about today but what are we doing today to ensure tomorrow’s prosperity. To ignore the facts we know today, while we enjoy yesterday’s wisdom, is to steal from our children’s future.
The facts are not in dispute.
Fact #1: The yearly 6 percent decline in the volume of oil flowing in the pipeline which today is only about 30 percent full cannot continue without dangerous consequences to Alaska’s economy.
Fact #2: According to the AOGCC and the DOR, exploration drilling activity has decreased from approximately 17 wells just three years ago to only four wells in 2010. These exploration wells indicate the level of interest in looking for the new discoveries that are essential to increasing the oil flow from new fields. With only one exploration well being drilled on the North Slope in the 2011 exploration season, we now have the lowest exploration drilling on Alaska’s North Slope since the discovery of Prudhoe Bay 44 years ago.
Fact #3: The AOGCC data also illustrates that it takes an average of 11 years to move a discovery to first production. We must do something before it’s too late.
Fact #4: Investment in exploration by an oil company is competitively based upon the total business environment. This includes the physical cost of exploration, development, and production as well as the taxes paid to local, state, and federal governments.
Fact #5: With lower costs and lower total government take, the oil industry in Canada and the Lower 48 is on fire with new exploration, drilling activity, and new production generating new jobs and a booming economy. The Lower 48 has been able to increase oil production the last few years while Alaska continues to decline at 6 percent a year.
It shouldn’t be hard to connect the dots. While we don’t control the costs of operating in a remote arctic environment, we do control the tax regime.
The status quo is not acceptable. There is no time to lose.
It cannot be a partisan political issue. In reality it is just a straightforward business decision to create the long term partnership of shared commitment and responsibilities that encourages growth. This has happened before.
Faced in 1998 with the price of oil reaching $9 a barrel and struggling with serious budget cuts, the Legislature and the executive branch worked together across party lines — and with industry — creating marginal field tax incentives and new agreements on old undeveloped leases, opening new state and federal land for exploration, and reducing exploration regulations.
Despite the gloom of low prices there was a shared spirit of optimism with the surge of investment, exploration, and production, which created new Alaskan jobs and businesses.
All of this inspired ARCO to coin the slogan “no decline after 99”.
And, in fact, these policies — and the investment of the oil companies — put more oil in the pipeline and reversed, for the first time in more than a decade, the declining “Prudhoe Bay curve”.
We know it can be done.
These results defied the conventional wisdom of the time that said with low oil prices tax, incentives and new investments could never happen.
With reduced budgets and services how could a state strapped for revenues offer incentives? And faced with current operating losses and an uncertain future how could the oil companies make significant new capital investments?
It was thought that agreements would happen only in times of prosperity with plentiful tax revenues and corporate profits, when parties could comfortably plan for the long range. However scarcity brings about a sense of urgency that sharpens the focus and gets results.
In the mid and late 90s Alaskans came together — urban and rural — Democrat and Republican — business and labor — to face the pending financial disaster without being afraid to do what needed to be done.
We now know that in the comfort of surplus revenues and high profits it is tempting to side step the warnings of declining exploration and throughput, while ignoring the fast train approaching from the other end of the tunnel.
How do we get back on track?
We know the formula: Tough, fair negotiations; commitments by both sides; an attitude of mutual respect guided by “trust but verify”; a tax system that provides balanced returns and fair incentives to all fields including new fields, but also legacy fields; and opening new state and federal exploration areas.
We know the status quo business as usual is not acceptable. The pipeline is already running on empty. Without change, it will run dry.
We need to act today to ensure tomorrow’s prosperity. Let’s make Alaska competitive.
