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Vol. 12, No. 46 Week of November 18, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

THE EXPLORERS 2007: Laird: Alliance members ‘make the investments work’

Paul Laird

Alliance General Manager

When it comes to Alaska’s oil and gas industry, there’s one thing on which we all seem to agree — Democrats and Republicans, the governor and the Legislature, industry friends and foes, business people and bureaucrats alike: Alaska should get its “fair share.”

But fair share of what — and what does that mean?

Maximizing short-term state government revenues by imposing the highest possible taxes on the industry and hoping it doesn’t have too negative of an impact on investment?

Maximizing jobs and business opportunities for Alaskans, stimulating new production and generating sustainable long-term state revenues by encouraging investment?

As companies whose ability to survive and thrive depends on oil and gas investment, members of the Alaska Support Industry Alliance are deeply concerned about constant changes in fiscal policy that put investments at risk.

The Alliance is a trade organization representing companies and individuals that provide goods and services to Alaska’s oil, gas and mining industries. Our membership ranges from small local contractors and vendors to the largest Alaska Native and Alaska-based corporations to the Alaska subsidiaries of multinational service companies.

Our 400 member companies and their 35,000-plus Alaska employees don’t make the multibillion-dollar investments in oil and gas development that fuel Alaska’s economy. They make the investments work.

As contractors and suppliers, we don’t know the perfect tax rate and terms that will generate the greatest state revenues while doing the most to stimulate investments and production. But then no one does — not the Alliance, not the Legislature, not the administration — not even the producers.

So far, proponents of imposing the third major oil tax increase in three years have premised their arguments on a plethora of improbable projections and a paucity of proof.

However, we do know that oil and gas investments and the production they fund are the lifeblood of Alaska’s economy, and it’s incredibly naďve to think Alaska can increase taxes by hundreds of millions of dollars year after year without shedding some blood.

We do know that every dollar in additional taxes is a dollar that won’t be invested in sustaining production, in creating business opportunities for Alaska companies like Alliance members, in generating good-paying private sector jobs for Alaskans.

We do know that the more state government takes, the more state government spends. Over the past five years, state spending has nearly doubled. Despite record prices and soaring revenues in fiscal year 2007, the state saved a paltry $5 million.

We do know that throughput in the trans-Alaska oil pipeline has already declined by two-thirds, and despite multibillion-dollar investments by the industry, it continues to decline 6 percent a year. And we know that without increased investment, the pipeline will reach its economic threshold in the next 15 or 20 years instead of in the next 50 or 60.

We do know that while the extent to which yet another tax increase will discourage investment is debatable, the fact that it will do absolutely nothing to encourage new oil production and construction of a gas project is not.

Shouldn’t that be at the core of every public policy discussion on oil and gas taxes and incentives: how we can work together to promote investments; How we can ensure our “fair share” of long-term jobs and business opportunities for Alaskans, rather than how much more money we can extract from the private sector without further risking our long-term future — just so state government can have more money to spend in the short term?

As Alaskans debate how to get our “fair share” of the revenues from oil and gas production — which effectively means taking more money from the industry to fund further growth of state government — let’s also consider the effects of any new taxes on Alaska’s competitiveness and the long-term health of our economy.

Let’s reject the notion that Alaskans derive maximum value from their resources by increasing costs and jeopardizing the economics of critical long-term investments just so we can have a bigger state government.

Many of us are more concerned about getting our “fair share” of the long-term jobs and business opportunities that depend on new oil and gas investments.

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