Point of View: Fair Share Act ballot initiative would recover Alaska’s profits from oil

Earlier this year, Alaska was torn apart by a supposed choice between slashing education, health care and other government services, vs. slashing our Permanent Fund dividends. It was the choice the oil industry wanted us to make, and the choice of the legislators they influence. Now Alaskans on either side of that divide can unite to support the Fair Share Act ballot initiative, which gives us the opportunity to keep our dividends and support educating our kids, by getting a real profit from oil production.

What should we get for selling North Slope oil from our state-owned lands? Look at the gas pump. The gas and oil folks are raising prices and we might follow that example.

Or we might remember what Gov. Jay Hammond wrote in Diapering The Devil: “Just as it the obligation of oil company CEOs to maximize benefits for their shareholders, so is it the obligation of the State’s CEO to do the same for his.”

Jay Hammond was a funny man. He took the title of his last book, Diapering The Devil, from a 1970 OPEC oil minister who said, “I call petroleum the devil’s excrement. It brings trouble …. Look at this ‘locura’ — waste, corruption, consumption, our public services falling apart. And debt, debt we shall have for years.”

Prophetic. He was the Venezuelan oil envoy back then and foresaw that the socialist politicians were just as corruptible as some of our Alaska capitalists. In Alaska, said Hammond, we managed to avoid much of the “befouling” by “halfway pinning on a diaper.”

But the old diaper is leaking badly. The oil barons have done well, in their constant lobbying these last 50 years, to reduce what they pay us for our oil. Alaska made a deal with them that they would get one-third of the profits. And he often repeated that he meant calculating this back to when the deal was made.

His final words on the subject were: “First, oil taxes must be adjusted to redeem the state’s initially agreed upon one-third share. “Only then should user fees or a broad-based sales or income tax be imposed if we lack sufficient revenues to fund essential government programs.”

That would take quite a few years even if we boosted annual take to half for Alaska. The Fair Share Act initiative does not ask nearly so much, but it is a step in the right direction. The sponsors point out that collecting the billions due to us would fund both full dividends and basic state services. Good thinking, I think.

The Fair Share Act will require complete transparency of revenues, costs, and profits for each producer of our major fields. For Prudhoe Bay, Kuparuk, and Alpine this will raise the gross rate from 4% to 10%, will eliminate the unnecessary $8/barrel credit, and will progressively increase the rate as the price of oil and producer’s profits rise. Even with these changes, the Fair Share Act, will recover less than the share we have historically received.

That is the result of recent years of massive tax breaks and credits given to the producers of our most profitable fields. And transparency. We should stop allowing deductions and offsets for claimed expenses for which they need no proof. There are strange things done in the midnight sun by the legislators that toil for oil — including the cloak of invisibility.

The Fair Share Act does not apply to smaller and developing fields but only to the old, major producers. Those fields get so many breaks, credits, and subsidies that, in three of the last five years, our share of production revenue was below zero. It’s time to go back to getting our Fair Share.

Larry Smith’s is a long-time area builder who thinks we should all do our best but not take ourselves too damn seriously.

Larry Smith

Larry Smith