July 10, 2013 / 7:42 PM / in 5 years

Alaska oil tax cut opponents make final referendum push

ANCHORAGE, Alaska, July 10 (Reuters) - Opponents of a recent tax cut for Alaskan oil producers fanned out this week to collect enough signatures to ensure voters can weigh in on a battle over the future of the state’s finances and its most lucrative industry.

Their proposed ballot initiative would seek to repeal the “More Alaska Production Act,” which in May scrapped a coffer-filling system championed six years ago by Sarah Palin when she was still Alaska’s populist governor, and little-known elsewhere.

Referendum sponsors must gather just over 30,000 signatures by July 13 for it to make the 2014 ballot. They currently have about 29,000, and in anticipation of their success, both sides are gearing up for a battle next year that taps into Alaska’s sense of identity and what it means to be an oil state.

“The (tax cut) opponents say, as an oil state, we need to control the oil industry and we’ve got to stand up for the free Alaska man and woman,” said Michael Carey, a seasoned Alaskan journalist, adding that proponents are mainly focused on keeping the oil flowing.

Not only does the debate center on an industry that funds 90 percent of the state budget, it also revives historic tensions over the perceived exploitation by outsiders of state resources.

It took a three-year battle before current Governor Sean Parnell signed the tax reform into law in May. He argued, along with the industry, that by promoting investment it would help reverse a decline in Alaska oil output, which is now about a quarter of its peak above 2 million barrels per day in 1988.

“When you sign the petition, you aren’t hurting the oil companies because they’ll find other places to invest their money. You’re hurting Alaska,” says one group fighting the referendum called “We Are Alaska” - set up by a state oilfield-support trade group that says it represents 50,000 workers with jobs from driving trucks to employee placement and training.


Referendum supporters are backed by former state Senator Vic Fischer, one of two surviving authors of the state constitution, and Bella Hammond, widow of 1970s-era Governor Jay Hammond.

The near-term fiscal impact of the tax cut means Alaska will run its first deficit since 2005.

The tax rewrite will cause $4.5 billion in lost revenue over five years, referendum backers say. Parnell’s own worst-case estimates correspond with that, depending on oil prices, but he argues the state can afford to wait for the new production.

The Alaska oil extraction debate is even more complicated than elsewhere in the United States, since the state’s natural resources are publicly owned and its constitution explicitly says they should be managed for maximum public benefit.

Hammond likens the referendum campaign to historic battles with fur traders and miners. “Control of our own resources is what makes us different from a colony,” she wrote in an Anchorage Daily News column.


Palin signed the old tax law before shooting to fame as the Republican vice presidential nominee. From a 25 percent base, rates rose for every $1 in price above $30-a-barrel oil, capped at 75 percent. Palin, who argued it demonstrated her tough stance against the business establishment, has been silent in the current debate.

The new system sets a maximum rate at 35 percent, though the effective rate, after various credits, will likely end up lower.

To underline the argument that it will help investment, BP announced last month a commitment of $1 billion more over five years to secure new rigs and enhance production in Alaska.

ConocoPhillips made a similar announcement in April, the same month that Spanish company Repsol cited the tax bill as a “critical factor” in a recent oil discovery.

Yet critics argue no tax system will reverse the realities of older reservoirs, and they note that Repsol’s Alaska exploration program, for one, started in 2011.

“It’s been sort of this constant stream of the governor and the oil companies pretending that investments that were decided under (the earlier tax) are somehow new under the tax giveaway,” said state representative Les Gara, an Anchorage Democrat.

The public seems evenly divided, said Ivan Moore, an Anchorage-based pollster and political consultant, who saw few obstacles for the referendum getting on the ballot to set up the battle in 2014. “It should be fun to watch, one way or another.”

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