Alaska’s Oil Production Tax: A Brief History · history, and Alaska history books to construct a...
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Alaska’s Oil Production Tax: A Brief History By Lisa Weissler Abstract: For decades, Alaska’s politicians and the oil industry have sparred over the state’s tax on its oil resources. This paper examines newspaper accounts, legislative history, and Alaska history books to construct a narrative of the people and politics involved in the state’s long and contentious oil tax debate – a debate that continues in the halls of Alaska’s capitol today. The history of oil in Alaska is the latest chapter in the saga of natural resource exploitation that began long before the United States purchased Alaska from Russia. First came the Russian fur traders who decimated wildlife populations, oppressed Alaska Natives, and left little of lasting value. After the 1867 purchase of the territory by the U.S., individuals and corporations mined, harvested, fished, and trapped without being burdened by much in the way of taxation. The result was a territory rich in resources yet still lacking the funds for its own economic development. Upon assuming his appointment as Alaska’s territorial governor in 1939, Ernest Gruening found Alaska to be a land of both promise and problems. The promise lay in the people, the land and the territory’s abundant natural resources. Among the territory’s problems was its lack of taxation that would capture economic benefit from resource extraction. Gruening made it his mission to establish a tax system that would provide revenue for the improvement and welfare of the territory. For the next nine years, outside interests, primarily salmon canning and mining companies, exerted enough influence on territorial legislators to succeed in defeating every major tax measure that Gruening put forward. The territory’s financial condition deteriorated to the point that vendors were threatening to cut off delivery of supplies and the University of Alaska was on the brink of collapse. Finally, in 1948, Alaskans voted out most of the sitting legislators, including the staunchest tax opponents. During the 1949 legislative session, the new crop of legislators passed a comprehensive tax system that would raise revenue for the territory and help fund needed public services. Gruening praised legislators’ action, saying they represented the desire of the people to “plow back” the wealth derived from Alaska’s resources into the development of Alaska and to making the territory their home. 1 The long-running battle over taxation between Gruening, territorial legislators, and the mining and fishing industries set the stage for Alaska’s future relationship to oil and the oil industry. As is often the case, the past was prelude to the future. 2 ***
Transcript of Alaska’s Oil Production Tax: A Brief History · history, and Alaska history books to construct a...
Alaska’sOilProductionTax:ABriefHistoryByLisaWeissler
Abstract:Fordecades,Alaska’spoliticiansandtheoilindustryhavesparredoverthestate’staxonitsoilresources.Thispaperexaminesnewspaperaccounts,legislativehistory,andAlaskahistorybookstoconstructanarrativeofthepeopleandpoliticsinvolvedinthestate’slongandcontentiousoiltaxdebate–adebatethatcontinuesinthehallsofAlaska’scapitoltoday.
ThehistoryofoilinAlaskaisthelatestchapterinthesagaofnaturalresourceexploitationthatbeganlongbeforetheUnitedStatespurchasedAlaskafromRussia.FirstcametheRussianfurtraderswhodecimatedwildlifepopulations,oppressedAlaskaNatives,andleftlittleoflastingvalue.Afterthe1867purchaseoftheterritorybytheU.S.,individualsandcorporationsmined,harvested,fished,andtrappedwithoutbeingburdenedbymuchinthewayoftaxation.Theresultwasaterritoryrichinresourcesyetstilllackingthefundsforitsowneconomicdevelopment.UponassuminghisappointmentasAlaska’sterritorialgovernorin1939,ErnestGrueningfoundAlaskatobealandofbothpromiseandproblems.Thepromiselayinthepeople,thelandandtheterritory’sabundantnaturalresources.Amongtheterritory’sproblemswasitslackoftaxationthatwouldcaptureeconomicbenefitfromresourceextraction.Grueningmadeithismissiontoestablishataxsystemthatwouldproviderevenuefortheimprovementandwelfareoftheterritory.Forthenextnineyears,outsideinterests,primarilysalmoncanningandminingcompanies,exertedenoughinfluenceonterritoriallegislatorstosucceedindefeatingeverymajortaxmeasurethatGrueningputforward.Theterritory’sfinancialconditiondeterioratedtothepointthatvendorswerethreateningtocutoffdeliveryofsuppliesandtheUniversityofAlaskawasonthebrinkofcollapse.Finally,in1948,Alaskansvotedoutmostofthesittinglegislators,includingthestaunchesttaxopponents.Duringthe1949legislativesession,thenewcropoflegislatorspassedacomprehensivetaxsystemthatwouldraiserevenuefortheterritoryandhelpfundneededpublicservices.Grueningpraisedlegislators’action,sayingtheyrepresentedthedesireofthepeopleto“plowback”thewealthderivedfromAlaska’sresourcesintothedevelopmentofAlaskaandtomakingtheterritorytheirhome.1Thelong-runningbattleovertaxationbetweenGruening,territoriallegislators,andtheminingandfishingindustriessetthestageforAlaska’sfuturerelationshiptooilandtheoilindustry.Asisoftenthecase,thepastwaspreludetothefuture.2
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MajorcomponentsofGruening’s1949taxsystemwereanincometaxandageneralpropertytax.In1953,thelegislatureswungfromaDemocraticmajoritytoRepublican.RepublicanlegislatorshadlongopposedGruening’sgeneralpropertytaxandoneofthenewmajority’sfirstactswastorepealthetax.Twoyearslater,anattemptedresurrectionofthepropertytaxplayedamajorroleinestablishingAlaska’sfirstoilandgastax.Amongthenewlegislatorsjoiningthe1955territoriallegislaturewasRepresentativeIreneRyan,aDemocratfromAnchorage.RyanstoodoutasthefirstwomantoflysoloinAlaska,thefirstwomantograduatefromtheNewMexicoSchoolofMines,andthefirstfemaleminingengineerandgeologistinAlaska.In1954,Ryanforetoldanoil-producingerainAlaskathatwould“rankwiththelargestinNorthAmerica.”3Rep.StanleyMcCutcheon,D-Anchorage,sharedRyan’sconviction.In1949,McCutcheonhelpedshepherdGovernorGruening’staxpackagetosuccess.McCutcheonmadereinstatementofthegeneralpropertytaxapriorityforthe1955territoriallegislativesession.HeandRyan,alongwithfellowDemocratswhowerenowbackinthemajority,wantedthepropertytaxinplaceasawaytotaxtheoilindustryifonedevelopedinAlaska.Inthecourseofthesession,miningandfishinginterestssucceededinturningamajorityofsenatorsagainstthepropertytaxlegislation.Atonepoint,McCutcheonaccusedtheSenateofbeingthe“salmon-controlledsenate”andsaidthattheirsympathieswerewithpeople“notconcernedaboutthebestinterestsofAlaska.”4Aftermonthsofbitterdebate,asolutionpresenteditself.TheHousemajorityagreedtodropthegeneralpropertytaxproposalandinsteadintroducestand-aloneoilandgasproductiontaxlegislationcraftedbyRyan.Aproductiontax,alsoknownasaseverancetax,isataxleviedbyasovereigngovernmentascompensationforthetakingofanonrenewableresource.Unlikeapropertytaxthatwouldapplytotheresourceintheground,aproductiontaxisleviedwhenproductiontakesplacebasedoneitherthequantityproducedorthevalueoftheproducedresource.UnderRyan’sproposal,Alaskawouldputaonepercenttaxonthegrossvalueofoilproducedintheterritory.Thegrossvaluewasdeterminedbymeasuringproductionatthewellheadandsubtractingtransportationcostsfromthedestinationsalesprice.Theproductiontaxwouldbeinlieuofapropertytax.TheoilandgasproductiontaxlegislationpassedthefullHouseonthesamedayitwasintroducedonavoteof17to2.TheSenatepasseditthenextdaywithjustthree“no”votes.Threedayslater,onApril6,1955,GovernorFrankHeintzlemansignedthebillintolawwithoutcomment.Withthat,Alaskahaditsfirstoilandgasproductiontax.5
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Thoughtheoilandgasproductiontaxpassedwithoutmuchdissent,thestorymighthavebeendifferentwithmoretimefordebate.Threedaysafterthebillwassignedintolaw,theAnchorageDailyTimesowner,Robert“Bob”Atwood,publishedascathingeditorialblastingthenewtax.Hedeclaredit“oneoftheworstpiecesoflegislationpassedbythe1955legislature,”andcomplainedthatthetaxwoulddiscourageoilcompaniesfromdoingbusinessinAlaska.6Atthetime,AtwoodandseveralotherAnchoragebusinessmen,knownasthe“SpitandArgueClub,”wereworkingwiththeRichfieldOilCorporationinanefforttojumpstartoildevelopmentinAlaska.RichfieldwasintheprocessofapplyingforoilandgasleasesintheKenaiNationalMooseRange.Topreventamonopolyonoildevelopmentintherange,thefederalgovernmentimposeda100,000-acrelimitontheamountanyonecompanycouldlease.Togetaroundthelimit,RichfieldenteredintoanagreementwithSpitandArgueclubmemberswherememberswouldapplyforleases.Ifoilwasfound,Richfieldwouldbuytheirleasesandpaythemroyaltiesontheoilproduction.7Atwoodandhisfellowbusinessmenwereardentstatehoodsupporters.TheyhopedthatthepossibilityofoilrevenuewouldconvincePresidentEisenhowerandCongressthatAlaskacouldsupportitselfasastate.ThoughtheirintentinworkingwithRichfieldmayhavebeendrivenbytheirdesireforstatehood,theagreementspaidoffhandsomelywhen,in1957,RichfielddiscoveredcommercialquantitiesofoilintheSwansonRiveroilandgasfieldlocatedintheKenaiMooseRange.BesidesmakingmillionsfortheAnchoragebusinessmen,thisdiscoverysetinmotionAlaska’sfirstoilboom,andthestartofalongbattleoverthestate’soilandgasproductiontax.8
***IntheyearsfollowingthediscoveryofoilincommercialquantitiesontheKenaiPeninsula,oilandgasdevelopmentintheregionincreasedexponentially.In1964,companiesdevelopedthefirstproducingoilwellsonstateownedoffshorelandsinCookInlet.Bytheendof1965,thereweresevenproducingoffshoreoilwellsandfifty-threeproducingwellsonthefederallyownedSwansonRiverfield.AnoilpipelineconnectedtheSwansonfieldtoarefineryinNikiski;anaturalgaspipelinetransportedKenaigastoAnchorage;andthefirstoffshorepipelinewouldsoonbecompletedtoconnectoffshoreCookInletfieldstocentralproductionfacilitiesbeingconstructedontheKenaiPeninsulashore.OntheNorthSlope,morethanfifteenoilcompaniesheldleasesonfederallands,andanoilandgasleasesalewasscheduledforadditionalareas.Duringthe1966legislativesession,Rep.NorbertSkinner,D-Clear,introducedthefirstproposedincreasetothestate’soilandgasproductiontax.HouseBill416wouldraisethetaxfromonetoeightpercent.Italsorequiredthattheincreasedoiltaxrevenuebeusedasabasisforadecreaseinthestateincometax.Skinnersaidheintroducedthebillbecausehedidn’twanttoseearepeatofwhathappenedinthesalmonindustry.“Takesomeandleavesome,”hesaid,“thestatemusttaketheinitiativetoseethatareasonablereturnisrealizedforthepeople.Oncetheoilcomesoutoftheground,theopportunityforrevenueisgoneforever.”9
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TheattacksonSkinner’sproposalcamefastandfurious,bothfromfellowlegislatorsandoilindustryofficials.Sen.JohnButrovich,R-Fairbanks,saidthebillwas“nothingmorethanabaseballbat,”thatwoulddiscourageoilandgasdevelopmentinAlaska.Oilcompanyrepresentativeswarnedthatanyincreasetotheproductiontaxwouldhaveanadverseeffectonfurtherexploration.AndRep.BruceKendall,R-Anchorage,wentsofarastointroducearesolutionrequestingconsiderationofaconstitutionalamendmentthatwouldprohibitchangingthelawsonoilandgastaxation.Theresolutionwasreferredtoaspecialcommitteeontheconstitutionwhereitdiedwithnoactiontaken.10Onavoteof15to22,theHousevotedtopostponeactiononHB416indefinitely.A1967proposaltoincreasetheproductiontaxtofourpercentalsofailedtogarnersupport.Itwouldtakeadisasterforlegislatorstoagreetothestate’sfirstoilandgasproductiontaxincrease.
***InAugust1967,amassiveflooddevastatedtheFairbanksregion.AttheendofSeptember,GovernorWalterHickelcalledaspeciallegislativesessiontodealwiththecostsofrecovery.Amongotherreliefmeasures,thegovernorproposedatwo-parttaxprogram–a$10annualtaxoneveryemployedpersoninAlaska,bothresidentandnonresident;anda“DisasterSeveranceTax”thataddedaonepercenttaxtotheexistingoilandgasproductiontax.Thenewrevenueswouldgointoadisasterreliefaccountthatwouldbeusedtohelppayfloodrecoverycosts,andtoprovideacushionforfuturedisastercosts.Taxcollectionswouldautomaticallyceaseonceaccumulatedfundsreached$7.5million,andautomaticallybereinstatedwhenthefundwentbelow$5million.11Thelegislativedebateontheproposedoilandgasproductiontaxincreasetookadifferenttrackfrompriorattemptsatraisingthetaxrate.Foronething,oilcompanyoppositionwasabsent.Foranother,legislatorswhopreviouslyopposedataxincreasegotbehindHickel’sproposal.Conversely,legislatorswhosupportedahigherproductiontaxopposedthelegislation,partlybecausetheythoughtthereweresufficientexistingfundstocoverfloodrelief,andbecausetheyviewedtheonepercentdisasteroiltaxasaploytopreventhighertaxesastheoilindustrygrewinthefuture.12HousemajorityleaderRep.TedStevens,R-Anchorage,ledtheefforttopassthefloodreliefpackage.StevensandotherHouseleadersmadeitclearthatthereliefpackagewasanall-or-nothingproposition.Thepressureworkedand,afterjustsixdays,thespecialsessionconcludedwithpassageoftheentirereliefpackage,includingtheadditionoftheonepercentdisasteroiltax,bringingthetotaloilandgasproductiontaxratetotwopercent.13Legislatorsunhappywiththeoutcomeofthe1967specialsessionintroducedoiltaxlegislationwithindaysofthelegislatureconveninginJanuary1968.SenatorMauriceSmith,R-Fairbanks,introducedSenateBill235thatwouldraisetheoilandgasproductiontaxto3.5percent.Rep.TomFink,R-Anchorage,followedsuitwithHB376,abilltorepealthedisasterproductiontaxofonepercentandincreasethetotaloiltaxratetofourpercentonhighvolumeproducingwells.
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“Asamatterofequity,”Finksaid,“theoilextractedfromstatelandsshouldbepayingatleastafourpercentseverancetax.”Finknotedthatfourpercentwasconsiderablylessthanthetaxbeingpaidinotherstates.TwentyHousememberssignedonasco-sponsorstoFink’sbill,elevenRepublicansandnineDemocrats.14Whileoilcompanieswerelargelyabsentduringthe1967oiltaxdebate,thenewbillscaughttheirattention.DuringajointHouseandSenateFinanceCommitteehearing,K.C.Vaughan,anoilindustryrepresentative,presentedwhatwouldbecometheindustry’sscriptfordecadestocome.Vaughanurgedlegislatorstomaintainapoliticalclimateandincentivesconducivetocontinuinginvestmentbytheindustry;warnedthatAlaskamustbecompetitivewithotheroilandgasregimes;andarguedfortaxstability.15MostlegislatorswerenotswayedbyVaughan’stestimony.Theywereparticularlyfrustratedbyhisrefusaltoprovidefiguresonindustryprofits.Vaughanwillinglyprovidedextensive,detailedinformationabouttheoverallcostsofoilexplorationanddevelopmentinAlaskaandprojectedbenefitstothestate.However,heconsistentlyassertedthereweretoomanyunknownstoanswerlegislators’questionsaboutthepotentialindustryprofitfromAlaskaoil,andthatthecompanieswouldconsideranyavailableinformationconfidential.SenatorSmithcomplainedthatwithoutthatinformation,legislatorswere“justcrawlingaroundinthedark,”tryingtodeterminetherighttaxrate.16DespitebroadRepublicanandDemocraticsupportforanoiltaxincrease,theRepublicanleadershipintheHouseopposedthetaxbills.WhentheHouseFinanceCommitteechairman,Rep.HaroldStrandberg,R-Anchorage,refusedtobringanyoiltaxbillupforahearinginhiscommittee,Rep.FinktooktheunprecedentedmoveofcirculatingapetitionamongHousemembersaskingtheRulescommitteechair,Rep.ClemTillion,R-HalibutCove,toblockthebudgetappropriationbillfrombeingvotedonuntilStrandbergtookupaSenateversionoftheoiltaxbill.Strandbergfinallycapitulatedandallowedavotewhentwenty-sixHousemembersindicatedtheywerepreparedtoforcethesenatebilloutoftheHouseFinancecommittee.17Intheend,thelegislaturepassedanoilandgasproductiontaxincreaseraisingthebaseoiltaxratefromonetothreepercent.Withthedisastertax,thetotaltaxwouldbefourpercentonthegrossvalueofoilandgas.ThebillpassedwithjustsixnovotesintheSenateandeightintheHouse.ThoughGovernorHickelwasnotafanoftheincrease,heallowedthemeasuretobecomelaw.18
***BythetimethenextlegislatureconvenedinJanuary1969,PrudhoeBayhadbeenconfirmedasaworld-classgiantoilfieldonAlaska’sNorthSlope.Thefindspurredanincreaseinthenumberofoilcompanylobbyistsconvergingonthestatecapitol.Oilcompanieshadcauseforconcern.Ataxstudyinitiatedbythe1968legislaturerecommendedincreasingtheoilproductiontaxonascalefromseventotenpercent.19
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Rep.Finkintroducednewoiltaxlegislationafewdaysafterthestartofthelegislativesession.UnderHB75,Finkproposedacents-per-barreltaxsystemthatwouldeffectivelyraisetheoiltaxfromfourpercenttoelevenpercentinbasinswithmorethan100,000barrelperdayproduction;andputthetaxatthreepercentforbasinsproducingless.AsHB75progressedthroughthesession,twocampsformed.One,headedbyFink,contendedAlaskawasn’tgettingafairshareofoilrevenuewhencomparedtootherstates.Theother,ledbySenatePresidentBradPhillips,R-Anchorage,opposedanytaxincreaseoutofconcernthatahighertaxratewouldjeopardizetheamountcompanieswouldbewillingtobidinanupcomingNorthSlopeoilandgasleasesale.AfterHB75passedtheHouseonavoteof31to9,Phillipsburieditinthreecommittees,leavingthemeasurenochancetogetthroughtheSenatebeforetheendofthesession.20Commentingonthefailuretopassataxincreasethatyear,Rep.BarryJackson,D-Fairbanks,opinedthatmaintainingalowtaxratewas“aninvitationtotheoilindustrytointerveneinthepoliticsofthestate.”Jacksonsaid,“TheoilcompaniesintendtobuytheStateofAlaskaanditsgovernment,andinsuchamannerwewon’tknowwhat’shappening.”21InSeptember1969,oilcompaniespaidarecord$900millioninbonusbidsforNorthSlopeleasesandtherighttodrillforoilandgasonstate-ownedland.Thesameweekastheleasesale,thefirstshipmentofpipeforan800-miletrans-AlaskaoilpipelinearrivedinValdez,thepipeline’ssouthernterminus.22
***WhileamajorityofHousemembersmaintainedtheirsupportforHB75thathadcarriedoverfromthepreviouslegislativesession,mostoftheSenateremainedlukewarmtoanynewoiltaxproposalinthe1970session.AlongwithGovernorKeithMiller,senatorswereconcentratingtheireffortsonmakingadealwithoilcompaniestojumpstartconstructionofaNorthSlopepipelineaccessroad.Theplanwasforthestatetobuildtheroadandthecompanieswouldrepaythecostslater.Senatorsfearedanoiltaxincreasewouldkeepcompaniesfromagreeingtotheroaddeal.23Neartheendofthelonglegislativesession,frictionbetweentheHouseandSenategrewtothepointthatRep.MikeBradner,D-Fairbanks,accusedSenatePresidentPhillipsofconsistentlyhavingmotives“identicaltothoseoftheoilindustry.”Bradnerlamentedthe“amountofeffectivenesstheoillobbyists”hadgainedinJuneau,sayingthat,“Ifthetaxpayersdon’tgetafairseverancetaxthisyeartheymaynevergetit.”Fortheirpart,theoillobbyistswerearguingthatthestateshouldtakethemajorityofitsoilmoneyfrombonusbidsforoilandgasleasesratherthanproductiontaxes.24OnJune7,1970,thefinaldayofthe147-daysession,theHouseandSenatesettledonaversionofHB75thatestablishedastair-steppedoilandgasproductiontaxwherethemoreawellproduced,thegreaterthetax–threepercentonawell’sfirst300barrelsaday;fivepercentonitsnext700;sixpercentonitsnext1500;andeightpercentonanyproductioninexcessof2500barrelsaday.Aswiththeoriginaltax,thenewtaxrateswouldbeassessedonthevalueofoilat
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thewellhead–themarketpricelesstransportationcosts.Theonepercentdisasterproductiontaxwasrepealed,andthetaxrateforgaswasraisedtofourpercent.ThefinalversionofHB75passedtheSenateonavoteof17to2;intheHouseitpassed30to9.25Withagreementontheproductiontax,theHouseapprovedtheNorthSloperoadauthorizationbilltheSenatewanted,butinsertedaclauserequiringthatthecostoftheroadbepaidbacktothestatewithinfiveyearsat7.5percentinterest.Thelegislaturealsoapproveda$120millionappropriationtofundtheroad’sconstruction.However,itwasallfornaught.Ultimately,GovernorMillerandthepipelineownerswereunabletoagreeonaplanforNorthSloperoadconstruction.Theoilcompanypipelineconsortium,nowcalledthe“AlyeskaPipelineServiceCo.,”finallyconstructedtheroadin1974.26
***In1972,anewproblempresenteditself.ThemassiveNorthSlopeoilfindremaineduntappedduetodelaysinpipelineconstruction.Oncebuiltandoilwasflowing,thecompaniesthatownedthepipelinewouldrecoverconstructionandoperatingcoststhroughtariffschargedtotheproducerstransportingoilthroughthepipeline.Theproducerswouldbeallowedtodeductthetariffincalculatingtheirproductiontaxandroyaltyobligationstothestate.AstudycommissionedbyGovernorBillEganshowedthatescalatingpipelineconstructioncostswouldresultinsuchhightariffsthattheirdeductionwouldreducethestate’sproductiontaxandroyaltyrevenuetolessthanzero.27Therewasanothertwist.ThecompaniesthatwerepartoftheAlyeskapipelinepartnershipwerealsopartofthesamecorporationsasthecompaniesthatwouldbeproducingtheoil.Eganworriedthatwithmonopolisticcontrolofoilproductionandtransportation,thecompanieswouldprofitfromoildevelopmentevenwhenthestategotnothing.HewasalsoconcernedaboutinadequateconstraintsonconstructioncostsandlimitedfederalregulatoryauthorityovertheamountoftariffAlyeskacouldchargefortransportingoilthroughthepipeline.Asasolution,Eganproposedthestateconstructandownthepipelineitself.28TheSenaterejectedthestateownershipconcept,proposinginsteaditsownsolutionforcontrollingpipelinecosts.Alyeskawouldneedright-of-wayleasesfromthestatetobuildthepipelineacrossstatelands.SenatorChancyCroft,D-Anchorage,proposedusingthestate’scontractingauthorityasalandownertoconditiontheright-of-wayleasessothatthemoretariffthecompanycharged,thehighertherentontheleases.TheideawasthatthiswoulddiscourageAlyeskafromcharginghightariffs.29Notconvincedthattheright-of-wayleasinglegislationwouldsufficientlyprotectAlaska’sinterests,GovernorEganproposedanalternativecents-per-barreloilproductiontax;thetaxpaidwouldbethegreateroftheexistingwellheadvaluetaxorthenewcents-per-barrelalternative.Thecents-per-barreltaxwouldensurethestatereceivedrevenuenomatterhowlowthewellheadvaluetaxwentdown.30
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IntheCapitolhalls,oillobbyistshintedthatcompanieswouldpulloutfromtheNorthSlopepipelineprojectorsuethestateiftheright-of-wayleasingactoroiltaxamendmentspassed.Eganrespondedtotheserumors,saying,“Lobbyistscantellyouanything,andIknowthey’llbetellinglegislatorseverything–they’llbeusingeverytrickinthebooktotrytokeepfromjusthavingafairandhonorableprofitoffthepeopleofAlaska’scrudeoilresources.”SenatorCroftcommented,“Anytimethestatehassignificantlyimproveditspositionasfarastheoilcompaniesareconcerned,they’vealwaysthreatenedthattheywouldeitherpulloutorconsiderpullingout.”31InJune1972,attheendofanotherlongcontentioussession,thelegislaturepassedthealternativecents-per-barreloilproductiontaxandtheright-of-wayleasinglegislation.NooilcompanywithdrewfromAlaska;thoughtheydidfollowthroughontheirthreattosuethestate.InSeptemberofthatyear,tencompaniesjoinedtogetherinlawsuitsfiledinstatesuperiorcourtchallengingtheright-of-wayandoiltaxlegislationaswellasapipelineregulatoryoversightbillthatalsopassedinthe1972session.32
***ThestartofthelegislativesessioninJanuary1973sawcontinuingdelaysinpipelineconstruction,andincreasingbudgetproblemsforthestate.However,theenergycrisisengenderedbyconflictsintheMiddleEastwaspromptingnationalinterestinNorthSlopeoilandingettingtheTransAlaskaPipelinebuiltasquicklyaspossible.Duringthe1973regularsession,GovernorEganandlegislatorsadopteda“waitandsee”approachregardingthependinglawsuitsoverthe1972oillegislation.Ifthecourtruledagainstthestate,legislatorswouldthenaddresshowtotaxandregulatetheoilindustryinAlaska.33Theresolvetowaitdidnotlast.AsCongressbegantakingactiononfederallegislationtoencouragepipelineconstruction,GovernorEganfearedthatthestatelawsuitswouldcausefurtherdelaysandthathewouldbeblamed.Duringthesummerof1973,Eganhadhisattorneygeneral,JohnHavelock,secretlynegotiateatentativeout-of-courtsettlementonthependinglawsuitswiththeoilcompanies.34EganannouncedthetentativesettlementinSeptember1973andcalledforaspecialsessiontostartinOctoberforlawmakerstoconsiderthelegislationneededtoimplementthesettlement.ThesecrettalkshadconcludedwiththeoilcompaniesagreeingtomoretaxrevenueforAlaskainexchangeforthestatebackingoffitsright-of-wayleasingrequirements.Thesettlementincludeda25-cent-per-barrelminimumoilproductiontaxanda20-millstatewidepropertytaxonoilandgasequipment.35Afteralmostamonthofwrangling,legislatorspassedapackagefairlyclosetotheoriginalsettlementproposal,includinganincreasedoilproductiontaxrateandthe20-milloilandgaspropertytax.Theright-of-wayleasingactwasgutted;ratherthanusingthestate’scontractpowerstocontrolpipelinecosts,thestateswitchedtomoreconventionalregulatoryright-of-
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wayleasingprovisions.Thelegislativepackagesatisfiedtheoilcompanies’majorpointsoflitigationandthelawsuitsweresettled.36TheMiddleEastoilembargobeganinOctober1973.OnNovember16,1973,PresidentNixonsignedtheTrans-AlaskaPipelineAuthorizationAct,eliminatingmostofthefederallegalchallengestothepipeline.ConstructiononthemassiveTrans-AlaskaPipelineSystem(TAPS)beganinMarch1975andwascompletedinMay1977.Thefinalcostwaseightbilliondollars.37
***Duringthe1976legislativesession,motivatedbyrisingoilpricesandincreasingoilcompanyprofitsonCookInletoil,legislatorsintroducedtaxproposalsforincreasingthestate’sshareoftheprofits.GovernorJayHammondrequestedthatthelegislaturedelayanytaxchangesforayear.HewarnedthatnewtaxeswouldreducethevalueofatemporaryreservestaxonPrudhoeBayoilandgas–ataxonresourcesinplace–thatwasenactedin1975asawaytobridgethebudgetgapduringpipelineconstruction.38Aftermanyhearingsovervarioustaxschemes,legislatorswentalongwithHammond’srequestandtabledtheiroiltaxlegislation.Instead,theyoptedtofundastudyofoiltaxationtobeconsideredinthe1977session.39InFebruary1977,theDepartmentofRevenueissuedacomprehensivereportonAlaska’soilandgastaxstructurethatidentifiedmultipleproblemswiththeexistingoilandgasproductiontax.Oneproblemwasthatthesystemfailedtoaddressvaryingeconomicfactorsforoilfieldsindifferentregionsofthestate.Anotherwasthe“economiclimit”forfields–thepointwhencostsofproductionexceedprofits.Reachingtheeconomiclimitcouldresultintheprematureshutdownofafieldwhileoilorgasresourcesstillremained.Thestate’sproductiontaxwasseenascontributingtoproductioncostsandpotentiallyhasteningthetimewhentheeconomiclimitforAlaska’soilfieldswasreached.40Thedepartmentreportrecommendedreplacingtheexistingstair-stepproductiontaxsystemwithanEconomicLimitFactor(ELF)tobeusedincalculatingtheamountoftaxowed.Asthecostofproducingoilorgasgotclosertoitseconomiclimit,applicationoftheELFwouldreducetheproductiontaxthatwasowed.Thiswasseenasanadvantageoverthestair-stepapproachbecauseitcouldbetiedtotheactualeconomicconditionofafieldanywhereinthestateandwoulddifferentiatebetweenthenewhighyieldNorthSlopefieldsandtheolder,decliningCookInletfields.41GovernorHammondintroducedoiltaxlegislationbasedonthereport’srecommendations.Hedescribedthelegislationasbeingdesignedtoprotectthestatefromthe“manipulationsofmultinationaloilcorporationsandthevagariesofLower48politics,”andsaiditwouldinsureAlaskansreceiveda“fairshare”ofrevenuefromoildevelopment.HouseSpeakerHughMalone,D-Kenai,predictedtheproposalwouldspark“screamsofprotestlikeyou’veneverheard,”and
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thattheoilcompanieswere“goingtothreatentotaketheirmarblesandgo.”Malonesaid,“It’sgoingtocomedowntowhetherthepeopleofAlaskawilllistentoscaretacticslikethat.”42Oilcompaniesdidopposethenewtaxproposal.AStandardOilofOhiospokesmantestifiedthatAlaskamightalreadybetaxingtheoilindustrytothepointwheretherewasadisincentiveforfutureexplorationandproduction.AtlanticRichfieldCo.(ARCO)arguedthatincreasedtaxeswereunnecessaryinlightofprojectedstatesurplusesofbillionsofdollars.ThespokesmanacknowledgedthatARCOcouldabsorbthetaxesandstillshowaprofit,butsaidthelegislationwas“neithernecessarynorwarranted.”AlobbyistforStandardcomplainedthatlegislatorskeptsayingtheyweregivingthecompaniessomething,buttheonlythinghesawwasthattheywere“gettingtheshaft.”43TheHouselargelysupportedthegovernor’spackagewhilehalftheSenatepushedforalowerstatetake.ReferencingthetenSenatemembersopposingthegovernor’staxproposal,Rep.Maloneopinedthat,“ThepeoplehereintheSenatearebuyingtheoilcompanyline.Theyhaven’tacquaintedthemselveswiththefactsbecausethefactsdon’tsupportthem.WeseeanundueinfluencebytheoilindustryintheSenate.”Harkeningbacktothepast,Rep.CharlieParr,D-Fairbanks,saidthatfortoolongthestatehadbeentreatedlikeacolonybyoutsidersclamoringforresources,concluding,“Iforonedon’tintendforAlaskatobeexploitedanylonger.”44Withcompromisesmadebybothsides,the1977legislaturepassedamajoroverhaulofthestate’soilandgasproductiontaxthatincorporatedtheproposedeconomiclimitfactor.ApplicationoftheELFformulawouldlowerorraisetheeffectivetaxrateuptoamaximumof12.25percentdependingonafield’sper-wellproductivity.Thenewsystemwasdesignedtobringthestateadditionalrevenuefromhighproductionfields,andtoserveasanincentivetoencourageproductioninmarginalanddecliningfieldsbyreducingthetaxasproductiondeclined.45ThefirstflowofoilthroughtheTrans-AlaskaPipelineSystemreachedtheValdezMarineTerminalonJuly28,1977.By1981,NorthSlopeproductionwasaround600,000barrelsperdayonitswaytopeakproductionoftwomillionbarrelsperdayin1989.
***Inthelate1970s,thecorporateincometax–ataxonacompany’sprofits–becameapointofcontentionbetweenthestatelegislatureandoilandgascompanies.Theformulaapportionmentmethodthatassignedapercentageofacompany’sworldwideincometoAlaskafailedtoaccountformuchoftheoilproductionincomethatshouldhavebeensubjecttostatetaxation.In1978,tobettercapturevalueearnedinthestate,aseparateaccountingmethodwasenactedwhereoilandgascompaniesweretaxedontheirincomeearnedinAlaska,separatefromincomeearnedelsewhere.AtlanticRichfield,Sohio/BP,andExxonobjectedandsuedthestate.
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Asthelawsuitslowlyprogressedthroughthecourts,thecompaniespaidtheoilandgascorporateincometaxunderprotest.Startingin1980,GovernorHammondbecameconcernedthatifthecompaniesultimatelyprevailedintheirlawsuit,thestatewouldbeonthehookforbillionsintaxrefunds.However,settlementoptionswouldhaverequiredthestategivinguphundredsofmillionsinrevenue.Legislatorsurgedtheadministrationtofindsolutionsthatwouldnotrequirethisrevenueloss.InMarch1981,GovernorHammondandthelegislativeleadershipoptedtostandfirm.Theyissuedajointstatementsaying,“anysignificantdecreasesinStateoilandgasrevenuesappearbothunwarrantedandunsupportedbyamajorityofAlaskans...AllagreethatanychangeswhichwouldgivelargesumsofmoneytotheoilindustryattheexpenseofthepeopleofAlaskaareunacceptable.”46Duringthe1981legislativesession,“backstop”legislationwascraftedtoprotectAlaskaintheeventthestatelostthecompanies’lawsuit.InJune,theHouseandSenateestablishedaconferencecommitteetosettletheirdifferencesonthelegislation.Meanwhile,theoilcompaniescirculatedasettlementproposaltotheadministrationandlegislature.Alegislativeanalysisoftheproposalconcludeditwoulddecreasestaterevenuesbyanaverageof$820millionperyearduringtheremainderofthe1980s.47Beforetheconferencecommitteeconcludeditsdeliberations,thelegislativeworldshifted.IntheHouse,Democratswereinthemajoritywith22-members.JimDuncanofJuneauhadbeenelectedspeakerfollowingathree-weekorganizationalbattle;RussMeekins,anAnchorageDemocrat,servedasmajorityleader.OnJune12,whilehisfellowDemocratswereincaucus,Meekinstookthespeaker’schair,convenedthefloorsessionwithminorityRepublicansandfellowdissidentDemocrats,andledavotetoelectanewspeaker.Whentheyheardwhatwashappening,theotherDemocratschargedintotheHousechambers,accidentallyknockingasidethepageswhohadbeentoldtoblockthedoor.Muchyellingandobjectionsensued,tonoavail.TheDemocratsquicklyfiledalawsuittonulltheactionstakenthatday.Butintheend,the16-memberRepublicancaucus,twoLibertarians,andfiveruralDemocratsprevailedtoformanewmajority.Reasonsgivenforthe“coup”includeddissatisfactionwiththelengthofthesession,conflictingpersonalities,andinattentionbytheHouseleadershiptoavarietyofissues.Themaindriverthoughwasmoney;around$4billioninoilrevenuewasanticipatedforthecomingyear,almostdoublefromthepreviousyear.Asthegovernorandlegislativeleadershipdevisedwaystodivvyuptheoildollars,someruralDemocratsfeltexcludedfromthediscussionsandworriedthattheircommunitieswerebeingshortchanged.TheyjoinedinthecouphopingthatthenewleadershipwouldbemoreresponsivetoruralAlaska’sfundingneeds.48Thoughmostlegislatorsatthetimesaidtheydidnotbelieveoilcompanieswereinvolvedinorchestratingthecoup,thecompaniesbenefitedfromthechangeofleadership.NewlyelectedSpeakerJoeHayes,R-Anchorage,changedthemembershipoftheHouseconferencecommittee
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thatwasconsideringthebackstopincometaxlegislation.LedbySenatorEdDankworth,R-Anchorage,thereconstitutedcommitteeabandonedthebackstopproposalandreplacedtheseparateaccountingoilandgascorporateincometaxwithamodifiedapportionmentmethodmoreacceptabletotheoilandgascompanies.GovernorHammondsignedthemodifiedapportionmentlegislationintolawbasedontheadviceofhisattorneygeneralwhowasconcernedabouthowmuchthestatewouldhavetorepaytheoilcompaniesifthestatelostthelawsuitoverseparatingaccounting.FormerSenatorChancyCroft,whowasinstrumentalinthepassageofseparateaccounting,isreportedtohavelaterstated,“ThedemiseofseparateaccountingmarkedthedaythatAlaskacapitulatedtotheoilindustry.That’swhenthestatebecameasellerratherthanaregulatorofoil…”Hebemoanedthelossofinformationthatseparateaccountingprovidedthestate,saying,“Thestate’spowertotaxislimited,butinformationcangiveyouagoodideaofwhatthelimitsare.[Separateaccounting]gavethestatesomebasistoformanintelligentpolicytowardstheoilindustry,andAlaskalostthat.”49Alsoin1981,thelegislatureamendedtheoilandgasproductiontaxinanattempttocompensatethestateforlostrevenueresultingfromtherepealofseparateaccounting.Theypassedlegislationincreasingtheproductiontaxratefrom12.25percentto15percentforoilproducedafterJune30,1981.Fieldscommencingcommercialproductionafterthatdatehadataxholidayofsortswithataxrateof12.25percentforthefirstfiveyearsofproduction,andthe15percentratekickinginafterfiveyears.ThelegislationsuspendedapplicationoftheELFformulaonPrudhoeBayproductionuntil1987.ThatmeantthetaxforthenextsixyearsofproductionfromtheprolificPrudhoefieldwouldbethefullapplicabletaxratewithnodownwardadjustments.50EventhoughAlaskaoilproductionlevelsweresteadilyincreasing,revenuefromtheoilandgascorporateincometaxdroppedfrom$860millionin1981to$236millionin1983.Duetovolatileoilpricesandtransportationcosts,oilproductiontaxincomeincreasedonlyaround$300million,from$1.2billionin1981to$1.5billionin1983.51In1985,theAlaskaSupremeCourtupheldtheconstitutionalityofseparateaccounting.Multipleeffortstoreinstituteseparateaccountinghavebeenunsuccessfulandamodifiedapportionmentmethodremainsinplacetothisday.
***Thecoupdemonstratedhowtheinfluxofoilmoneycreatedleverageforlegislativeleaderstoinfluencelegislators’behavior,particularlyruralDemocratswhoneededtosecurefundsformuch-neededcapitalprojectsintheirregions.Alaska’selectionsstartedchangingaswell,withcampaigncontributionsincreasinglycomingfromoilinterests.Inthe1984election,VECO,anAnchorage-basedoilfieldservicecompanyownedbyBillAllen,rankedasthetopcontributortostatelegislativeraces,givingaway$109,720incampaign
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donations.VECOwaslaterfoundtohaveviolatedstatecampaignlawswithapayrolldeductionprogramthatdeducted$100fromemployees’paychecksforpoliticalcontributionsandpassedthefundstocandidatesselectedbycompanyofficials.AroundninedollarsoutofeverytenwenttoRepublicans.52AsaVECOlobbyist,formerSenatorEdDankworthimplementedthepayrolldeductionplan.DankworthjoinedVECOafterleavingthelegislatureunderacloudofcontroversy.In1982,hewasindictedontwocountsofcriminalconflictofinterestforusinghispositionasSenateFinanceco-chairtotrytogetthestatetobuyasurpluspipelinecampheowned.Heboughtthepropertyfor$900,000andthensoughta$3millionappropriationforpurchasebythestate.Afteralengthycourtbattle,thecasewasdismissedbasedonlegislativeimmunity.53Dankworthbecameknownforgettingindustry-friendlylegislatorselectedandhavingahandinorganizingtheSenate.Hisinfluencewassopervasivethathewasknownasthe“21stsenator.”The1985legislaturesawtheplacementofFairbanksRepublicanDonBennettasSenatePresident.BennettwasoneoffivesenatorswhoreceivedcampaigncontributionsthroughVECO’sillegalpayrolldeductionplan.WhenBennettranforlieutenantgovernorin1986,hereceivedover$21,000fromVECOandaround$5,000fromotheroilinterests,farmorethananyotherstatewidecandidate.BennettlostthatelectionandresumedhispositionassenatoruntilhisdeathinAugust1987.54DankworthconcentratedVECO’sother1986electioneffortsontheRepublicandominatedSenate;donating$65,150tofourteenRepublicansandjust$4,250totwoDemocrats.ARCO,amajorPrudhoeBayoilproducer,surpassedVECO’sdonations,makingthemthenumberonecampaigncontributorandVECOnumbertwo.MostoftheoilmoneywenttoRepublicancandidates.Offorty-threedonationsrangingfrom$1,000to$4,525,ARCOcontributedtothirty-threeRepublicans.AnARCOspokesmanexplainedthecompanycontributedtocandidateswhowere“soundintheirfiscalviewsandpro-development.”JohnKerrigan,vicepresidentofVECO,saidhiscompanywassupportingcandidateswhofavoredresourcedevelopmentand“astabletaxpolicy.”55Oilindustryinterestinthe1986electionwasspurredbythependingtaxbreakforthePrudhoeBayoilfield–the1981suspensionofapplicationoftheELFformulatoPrudhoeproductionwasscheduledtoexpirein1987.Oilcompanieswantedtoensurethatthetaxbreakremainedinplaceandtheelectionofferedthemanopportunitytogetlike-mindedlegislatorselected.“Weneedtoflexourpoliticalmuscle,”ARCOpresidentHaroldHeinzewroteinanin-housepublication.“We’rethelargestprivateemployerinthestate.Peopleknowwe’vegotaloadedgun.Theydon’tknowyetifit’sablankorsilverbullet.Theywillseetheproofinthiselection.”56ThebiggestbeneficiaryofoilrelatedcampaigncontributionswasSenatorJanFaiks.AnAnchorageRepublicanandformerschoolteacher,Faiksfirstwonelectionin1982.Consideredfriendlytoindustry,VECOofficialsandemployeescontributed$20,100toher1986reelectioncampaign–almostdoublethenexthighestcontribution.Atthestartofthe1987legislative
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session,DankworthhelpedtoinstallFaiksasPresidentoftheSenate,amovethatpaidoffinabigwayfortheNorthSlopemajoroilproducers.57
***A1986legislativereportidentifiedseveralproblemswiththeELFtaxsystem–amongthemthatoncethesuspensionoftheELFformulatoPrudhoeBayexpiredin1987,thesystemwouldprovidethefieldwithataxreductiondecadesbeforeitcouldbeconsideredmarginal.Atthetime,PrudhoeBayandthenearbyKuparukoilfieldwereNorthAmerica’stoptwolargestoilfields.ApplicationoftheELFtoKuparukwasalreadyreducingthefield’soilproductiontaxratefromfifteenpercenttosixpercent,costingthestate$58millionintaxrevenue.UnlessapplicationoftheELFforPrudhoeBaywasdelayedorrepealed,Alaskawouldlosehundredsofmillionsmoreinoilrevenueinthecomingyears.58InMarch1987,theDepartmentofRevenueCommissioner,formerlegislatorHughMalone,testifiedtothelegislaturethatapplicationoftheELFformulatoPrudhoeBaywouldresultinalosstothestateof$80millionthefirstyear,and$100millionperyearinfollowingyears.Therevenuesituationwasparticularlycriticalforthestateduetoasharpdeclineinoilpricesandapotentialbudgetdeficit.Concernedaboutthelossinneededoilrevenue,GovernorSteveCowperintroducedlegislationtocontinuetheELFsuspensiononPrudhoeBayforanotherfiveyearsalongwithothermodificationstoassistmarginalfields.59TheHouseDemocraticmajoritytookupthegovernor’sproposedELFlegislationandpasseditsversionofthebillonApril1,1987byavoteof25to15.SenatePresidentJanFaiksgavethebillfivecommitteereferrals,effectivelykillingitforthesessionandallowingtheELFformulatobeginapplyingtothehighlyproductivePrudhoeBayoilfield.60In1988,GovernorCowperandtheHouseDemocraticmajoritytriedagaintogetchangestotheELF,bothtoaddresstheapplicationoftheformulatothePrudhoeBayfield,andtomakethetaxsystemmoreeffectiveforencouragingmarginalfielddevelopment.SenatePresidentFaiksagainstymiedtheirefforts.SheassertedthattheELFwasworking,thatitwaspromptingmoredrillingandcreatingnewjobs,anddeclaredtheSenatewouldnotevenconsiderrepealingthetaxbreak.61In1989,theNorthSlopewasatitspeakproductionoftwomillionbarrelsofoilperday.Yet,withlowoilprices,staterevenuewasdecliningandadeficitofapproximately$213millionwasprojected.62Forthe1989legislativesession,GovernorCowperannouncedhiscontinuingsupportforrevisiontotheELFtaxsystem.Withoutachange,theadministrationestimatedAlaskawouldlosemorethan$1billioninrevenueoverthenextfiveyears.TheHouseDemocraticmajorityrenewedtheireffortstomodifytheELF.Soonafterthestartofsession,theHouseFinancecommitteeintroduceditsownmeasuretoreducetheELFtaxbreakontheproductiveNorthSlopefieldsandincreasethetaxadvantageformarginalfields.
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InsupportingtheHouseproposal,Cowpersaid,“weallowntheoilfieldsontheNorthSlopeandwehavegrantedthecompaniestherighttoremovetheoil.”HouseRepublicanstookadifferentview,saying,“MembersoftheoilindustryhaveproventobegoodcorporatecitizensinAlaskaandastabletaxpolicyisimportanttoencourageeconomicdevelopment.”TheRepublicans’prioritywasreducingthestateoperatingbudget.63ThenewSenatePresident,SenatorTimKelly,R-Anchorage,saidhedidn’tseeanybetterprospectforgettingthetaxchangespassedthaninthepasttwoyears.Inthe1986election,Kellyreceivedmorethan$23,000incampaigncontributionsfromoilandmininginterests,withnearly$12,000comingfromindividualsandcompaniesrelatedtoVECO.64TheHousepassedtheoiltaxrevisionsonMarch22,1989onavoteof21to19.SenatePresidentKellygavethebillthreecommitteereferrals.Indicationswerethattheproposalwouldmeetthesamefateaspastattemptsandnotevengetahearing.65Then,onMarch24,1989,theExxonValdezwentagroundinPrinceWilliamSound.Asspilledoilspreadthroughtheresource-richwatersandpublicanimositytowardtheoilindustrygrew,senateleadersbeganreconsideringtheirviewontheproductiontaxlegislation.SenatorDickEliason,R-Sitka,aformeropponentofthetaxchanges,introducedameasurenearlyidenticaltotheHousebill.“Publicsupport(fortheoilcompanies)hasdwindled,”Eliasonsaid.“Alotofpeoplethinkwe’vebeenbetrayed.”66TheHousebillbeganmovingintheSenate.Atonepointitbecamesomethingofabargainingchip.SenateRepublicanswerepushingabilltorecriminalizemarijuana,ameasurestronglyopposedbyHouseDemocrats–itwasthenlegalforadultstopossessuptofourounces.Kellybluntlydeclared,“MarijuanawillbeaconditionforELF.”67Thenithappened.LateonaSundaynight,onMay7,thefullSenateheldavoteontheHouseversionoftheELFchanges.Thebillfailedonavoteof9to11.Therewasacallforreconsideration,settingupthebillforanothervotethenextday.Beforethevote,GovernorCowperissuedastatement,saying,“TheoilcompanieswonSundaynight.It’sassimpleasthat.Monday’sfinalvoteonthisissuewillproveonething:whethertheoilindustryrunsthisstateorwhetherthepeopleofAlaskaareincharge.”Onreconsiderationthenextday,thebillpassedonavoteof11to9.68TherevisedELFlegislationwassignedintolawonMay31,1989.Thismarkedthelastsignificantchangetotheoilandgasproductiontaxforthenextseventeenyears.
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In2003,alegislativeresearchreportfoundthatapplyingtheELFformulafrom1995to2002,particularlyasappliedtotheNorthSlope,reducedrevenuetothestatebyapproximately$1.7billion.Inaddition,theELFwasnotencouraginginvestmentinfutureexplorationand
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development;evenwithlowtaxes,themajorproducerswerenotsignificantlyreinvestinginAlaska.69In2004,DemocraticlegislatorsintroducedlegislationtochangetheELFsothatAlaskawouldgetmoreinproductiontaxeswhenoilpriceswerehigh,astheywereatthetime.TheideawasnotpopularwiththeRepublican-ledmajoritiesandthebillsreceivedscantattention.70Startingin2005,discussionsforanewoilandgasproductiontaxsystembecameanintegralpartofGovernorFrankMurkowski’scontractnegotiationswiththethreemajorNorthSlopeoilandgasproducersonaproposednaturalgaspipelineproject.Ifbuilt,thepipelinewouldtransportgasfromtheNorthSlopetooutsidemarkets.Tosecuretheircommitmenttoconsiderbuildingthegasline,ExxonMobil,BP,andConocoPhillipswantedtheexistingELFoiltaxsystemlocked-inthroughthegaslinecontracttoprovidetaxcertaintyandstabilitythroughthelifeofthepipelineproject.Thoughlikelyunconstitutional,Murkowskiofferedacontractualtermof20yearsofcertaintyforoiltaxationiftheproductiontaxsystemwaschanged.In2006,aspartofthecontinuinggaspipelinenegotiations,theMurkowskiadministrationandproducersagreedtoshiftfromanoilandgasproductiontaxsystembasedongrossvaluetoanetprofitstax.UndertheproposedPetroleumProductionTax(PPT),companiescoulddeductcertainoperatingandcapitalleaseexpenditurestodeterminetheamountofprofitsubjecttothetax.Bythistime,productionfromtheNorthSlopeoilfieldsaveraged760,000barrelsperdayandwasdecliningatarateofaroundsixpercentperyear.Combinedwithmultipletaxcredits,theproposednettaxsystemwasdesignedtoencouragethemajorproducerstoinvestinnewtechnologiesthatwouldmaintainorincreaseproductioninthelargelegacyfields,andencouragenewentrantstoinvestinnewexplorationanddevelopmentthatwouldhelpmaintainproductioninthefuture.InFebruary2006,theMurkowskiadministrationandproducerssettledona20percentnetprofittaxrateand20percenttaxcreditaspartofthegaslinenegotiations.Thesubsequentlegislationbecameknownasthe“20/20”proposal.71IncommitteehearingsonthePPTlegislation,ExxonMobil,BP,andConocoPhillipsrepresentativesofferedreluctantsupportforthe20/20proposal.Thoughtheyfeltthatthe20percenttaxratewastoohigh,theytoldlawmakerstheywouldsupportthebillasitrepresentedpartofthenegotiatedagreementonthegaspipelinecontract.Theysaidtheirmaininterestwasa“predictableanddurable”taxsystemthatwouldenablethegasprojecttomovetothenextphase.72Boththeadministrationandproducersopposedanylegislativeattemptstochangethetaxrate,arguingthatthe20/20proposalwasessentialtogettingagaslineandattractingtheinvestmentnecessarytoleadtomoreproductionfromAlaska’soilfields.Theproducersand
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otheroilinterestsranmultipleadstoconvincethepublicthatahighertaxratewoulddiscourageinvestmentanddoharmtotheindustry.Legislatorspushedback,withonesayingtheywouldnotbebulliedintoabaddeal.Anothercomplainedthattheruleswerebeingchanged;thattheyhadbeentoldtheissuewasthatthecurrentELFwas“broken,”andnowtheywerebeingtoldthatiftheyincreasedtheproposedtaxrateof20percent,itwouldnegativelyimpactnegotiationstosecureanaturalgaspipeline.73Inanattempttofindamiddleground,theSenatepassedSB305withitsversionofthePPT.Thelegislationproposeda22.5percenttaxratewitha25percentcapitalexpendituretaxcreditandincludedaprogressivityfactortriggeredwhenoilpricesexceeded$50perbarrel.Aprogressivityfactorincreasesthetaxrateasthenetvalueonabarrelofoilincreases,anddecreasestheratewhenoilpricesfall;thishelpsensurethestatebenefitscommensuratewiththeproducingcompanieswhenoilpricesarehigh,andhelpsproducerswhenoilpricesarelow.Theadministrationobjectedtothe22.5/25proposal.GovernorMurkowskisaidthatthehighertaxcreditcreatedtoomuchriskforthestate,andthehighertaxratewoulddetercompaniesfrommakingtheinvestmentneededtocurtailthedeclineinoilandgasproduction.Theadministration’sconsultant,Dr.PedrovanMeurs,alsocautionedagainstthe25percenttaxcredit,pointingoutthatiftherewereseveralyearsoflowoilprices,thecreditscouldpileupsomuchthatthestatewouldnotcollectanyproductiontax.74OnMay6,2006,theHouseFinancecommitteepassedoutitsversionofSB305.ThecommitteebillreplacedtheSenate’s22.5/25proposalwiththegovernor’soriginal20/20plan.OnMay7,thefullHousebegandebateonthelegislation.Whatensuedwastwodaysoflegislativewranglingovertaxratepercentagepoints,withsomanyamendments,andamendmentstoamendments,thatsometimeslegislatorsdidnotknowwhattheywerevotingon.Thefirstamendmentonthetaxratewouldhavemovedtheratefrom20percentto22.5percent.Themakeroftheamendment,Rep.MikeKelly,R-Fairbanks,jokedthathewas“gettingstronghindlegs–I’mlearningIgettowalkwiththreelobbyistshangingoffeachleg.”Anamendmenttothefirstamendmentwouldhaveraisedtherateto25percent.Bothfailed.75Thenextamendmentwastoraisethetaxrateto21.5percent.Tothesurpriseofmanywatchingthedebate,theamendmentpassedonavoteof21to19.Almostimmediately,therewasacallforan“at-ease,”wherelegislatorsarefreetoconversewitheachother,leavethefloortoconferwithwhoevermaybeinthehalloutsidetheHousechamberdoors,andmakeortakephonecalls.Onthisparticularday,thehallwasfilledwithMurkowskiadministrationstaff,senatorsopposedtoahighertaxrate,andoilcompanylobbyists.Uponcomingbacktoorder,Rep.PeteKott,R-EagleRiver,movedtorescindtheprioractionadoptingtheamendmenttoraisethetaxrateto21.5percent.Themotionpassed.Theamendmenttoraisethetaxratewasbackbeforethebody.Thistimeitfailedonavoteof20to
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20.SpeakerJohnHarris,R-Valdez,andRep.BruceWeyhrauch,R-Juneau,changedtheirvotesfromyestono.Rep.PeggyWilson,R-Wrangell,changedhervotefromnotoyes.76Whenanotheramendmentpassedtoraisetherateto22.5percent,theactionwasagainrescinded.Andsoitwentwithmoreamendments,eachadjustingthetaxrateupordownbyjustafewpercentagepoints.77ThebiggestdramaoccurredwhentwoDemocraticminoritymembersofferedanamendmenttosetaminimumtaxfloortoprotectstaterevenueduringtimesoflowoilprices.MajoritymemberRep.Weyhrauchspokeinsupportoftheamendmentanditpassedonavoteof23to17.An“atease”wascalled.Uponreconvening,Weyhrauchmovedtorescindtheactiontoadopttheamendment,angrilydeclaringthathehadlearnedtheproposedminimumtaxwouldhurtsmallindependentoperators.78MinorityLeaderRep.EthanBerkowitz,D-Anchorage,thenspokeout.HedecriedthephonecallsbeingtakenontheHousefloor,andthelobbyistsinthehallwayandinthegallerytellinglegislatorshowtovote.Hesaid,“YouknowMr.Speaker,yougotatelephonecall.Iwalkedoutintothehallway,surroundedbydozensoflobbyists.Allscreamingaboutthegreatinjusticewe’vedonetothem...Butthisisourfloor.Ourfloor.Notelephonecallissupposedtochangewhatwe'redoing.Nolobbyistissupposedtopeerovertherailingandtellustochangeourmind.Nevershouldhappen...OurobligationistothepeopleoftheStateofAlaska.Ourobligationisconstitutionalandistogetthemaximumbenefitfromouroil,andourgas.That'swhatwesworeanoathtodo.WedidnotswearanoathtoincreaseprofitabilityforcompaniesheadquarteredinHouston,andLondon,andelsewherearoundtheglobe.So,othersmaywanttocompromise.Isayenough.”79TheHouseultimatelysettledona21.5percenttaxrateand20percenttaxcreditwithaprogressivityprovision,aminimumtaxfloor,andareducedtaxratefortheCookInletregion.Ona10to10vote,theSenatefailedtoconcurintheHouseamendmentstoSB305andthebilldiedattheconclusionoftheregularsessiononMay9,2006.Followingtheendofthe2006regularsession,thegaslinecontractnegotiatedbetweenGovernorMurkowskiandtheproducerswasrevealed.Manylegislatorsfoundtheprovisionsunacceptable,particularlylockinginoiltaxes.Ultimately,thelegislaturefailedtoapprovethecontract.However,workcontinuedonthePPTlegislation.ThefinalPPTpassedonAugust10,2006duringathirdspecialsession.Thelegislationthatbecamelawestablishedabasetaxrateof22.5percent;a20percenttaxcreditforqualifiedcapitalexpendituresandcarried-forwardannuallosses;a.25percentprogressivityfactortriggeredwhenataxpayer’snetprofitsexceeded$40perbarrel;aminimumtaxofnotlessthan4percentofthegrossvalueatthepointofproduction;asmallproducercreditupto$12million;a$6millioncreditapplicabletoregionsoutsideCookInletandtheNorthSlope;atransitionalinvestmentcreditforcostsincurredinthefiveyearsbeforethenewproductiontax
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tookeffect;andcompaniesproducinglessthan50,000barrelsperdaycouldqualifyforacashrefundofqualifiedcapitalexpendituresandannuallosscreditsiftheymetcertainconditions.80ThePPTwasafundamentalshiftinthestate’srelationshipwiththeoilandgasindustry.Eitherthroughreducedtaxrevenueordirectcashpaymentsfromthestate,Alaskabecamethesinglelargestindirectinvestorinnewoilandgasprojects,sharingintherisksofthecompanies’investmentdecisions,thoughnottheactualdecision-making.
***
DuringtheMay7thdebateonSB305,alargemanwithanimposingpresencetookafrontrowseatintheHousegallery.ThemanwasBillAllen,CEOandfounderofVECO.HavingthenaturalgaspipelinecontractbetweenthestateandoilandgasproducerswasimportanttoAllenbecauseVECOstoodtoprofitfromcontractsforpipelineconstructionactivities.GettingthePPTthroughthelegislaturewiththe20/20proposalintactwasessentialtogettingthegaslinecontractfinalizedandAllenwastheretomakesureithappened.AsAlaskanslaterlearned,itturnedoutAllenwasnottakinganychancesingettingaproductiontaxacceptabletotheoilcompanies.Startingin2005,theFBIsecretlyrecordedconservationsbetweenAllen,RepresentativesKott,WeyhrauchandVicKohring,R-Wasilla,andRickSmith,VECO’sVicePresidentforGovernmentRelations.VideoslatermadepublicshowedAllenusinghisinfluenceandmoneytoenlistthethreelegislators’supportformaintainingthe20/20PPTproposal,particularlytokeepthetaxrateat20percent.AccordingtotheFBIKott/Weyhrauchindictment,onJanuary8,2006,thedaybeforethestartofthelegislativesession,KottleftAllenaphonemessagesaying,“Thingsstarttomorrow.Ijustwantedtogetwhatourinstructionsare.”LaterconversationsthattookplacethroughoutthesessionincludeddiscussionsabouthowAllencouldprovidemonetarysupporttoKottandthetacticsKottwasusingtoinfluencelegislators’votesontheoiltaxlegislation.81Meanwhile,Rep.WeyhrauchwashavinghisownconversationswithAllen.OnMay4,2006,Weyhrauch,alawyer,offeredtoprovidelegalservicestoVECO.Thatsameday,inatapedconversation,AllenandSmithdiscussedwhetherVECOshouldhireWeyhrauch,andthattheybelievedhisjobsolicitationwasconnectedtowhetherornotWeyhrauchwouldsupportVECO’spreferredversionofthePPT.OnMay7,Weyhrauchchangedhisyesvoteonraisingthetaxrateto21.5percenttonoafterKott’smotiontorescindpassedandtheamendmentwasbackbeforethebody.RecordedconversationsbetweenKottandAllenlaterthatdayrevealthatWeyhrauchswitchedhisvoteafterreceivinginstructionsfromKottandAllentomakethechange.OnMay9,AllentoldSmiththeywouldneedtogiveWeyhrauchsomecontractlegalworkifthe20percentPPTbillpassedthelegislature.
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ConversationsandmeetingsbetweenAllen,Smith,Kott,andWeyhrauchcontinuedthroughthefirstandsecondspecialsessions.Atonepoint,AllengaveKott$1,000incash.LaterVECOcoveredthecostsofapollconductedforKott’sreelectioncampaignandpaidKottafraudulentlyinflatedinvoiceonbehalfofKott’shardwoodflooringbusiness.AllenandSmithcontinuedleadingWeyrauchtobelievetheywouldprovidehimwithcontractworkinexchangeforhissupportofthe20percenttaxrate.KottandWeyhrauchwerenottheonlyonesactingonAllen’sbehalf.InaMarch30,2006surveillancevideo,Rep.KohringbeginsaconversationwithAllenaskingforAllen’shelpdealingwitha$17,000creditcarddebt.Allenagreestotrytofigureoutsomethingthatwon’tbelinkedtohimorVECO.ThisisfollowedbyAllengivingKohringhundreddollarbillsforKohringtopassontoKohring’sdaughter.Kohringacceptseachbillwithapolitethankyou.Intheend,hecommitstomakingeveryefforttokeeplobbyinghiscolleaguesforthegovernor’s20/20plan.82Thereweresenatorsinvolvedaswell.InDecember2008,SenatorJohnCowdery,R-Anchorage,pledguiltytoconspiringtobribeanotherAlaskasenator.CowderyadmittedthatheandAllenmetastatesenatoronJune25,2006atanAnchoragerestauranttooffertheothersenator$10,000incampaigncontributions.Theofferwasconditionedontheothersenator’ssupportforthePPTlegislationassupportedbyAllen.Thesenatordeclined.83SenatorBenStevens,R-Anchorage,SenatePresidentduringthePPTdebate,wasalsoimplicated.Thoughnotchargedwithanycrime,StevenswasaparticipantorreferencedinrecordedconversationswithBillAllenaboutretainingthe20/20proposal.DuringKohring’strial,RickSmithtestifiedthat$250,000inconsultingfeesthatVECOpaidStevenswasabribe.Andin2010,theAlaskaDispatchNewspostedareenactmentofaJune5,2006phonecallbetweenStevensandAllenwhereAllenblatantlyrecruitedStevenstoworkforVECO,andStevensandAllendiscussedAllen’sholdoverKottandWeyhrauch.84InMay2007,AllenandSmithpledguiltytobribingAlaskalawmakersinexchangeforfavorablevotes.Kott,Kohring,andWeyhrauchplednotguiltytochargesofbribery,conspiracy,andextortion.Inthefallof2007,juriesfoundKottandKohringguilty.KottwassentencedtosixyearsinprisonandKohringtothreeandahalfyears.InMarch2011,theirconvictionswerevacatedandthecasesremandedfornewtrialsbecausetheprosecutionhadsuppressedinformationthatmayhavehelpedtheirdefense.Laterthatyear,theybothagreedtopleadguiltyinexchangeforbeingsentencedtotimeservedandconditionsontheirrelease.Alsoin2011,federalprosecutorsdroppedthefourfelonychargesagainstWeyhrauchinreturnforhisagreementtopleadguiltytoasinglemisdemeanorinstatecourt.85Through2006andinto2007,oilpriceswereapproaching$90perbarrel.NorthSlopeproductionwasaround740,000barrelsofoilperdayandcontinuedtohaveasixpercentannualdeclinerate.
***
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The2006primaryelectionsawthedefeatofGovernorMurkowskitoarelativenewcomer,formerWasillamayorSarahPalin.Palinranonananti-corruption/anti-corporateplatformandwonthegeneralelectionagainstformergovernorTonyKnowles.In2007,PalininitiatedareviewofthePPTtaxstructure.TheadministrationfoundthatthecostanalysisonwhichthePPTwasbasedhadfailedtoadequatelypredictthecapitalandoperatingcoststhestate’soilproducerswoulddeductfromtheirtaxes.Thehighercostsandotherfactorsresultedinan$800milliongapinanticipatedrevenue.86Thecostandrevenuedisparity,andthecorruptionscandal,ledGovernorPalintointroduceAlaska’sClearandEquitableShareAct(ACES).Thebillraisedthebasetaxratefrom22.5percentto25percentandmaintainedthegeneroustaxcreditsenactedunderthePPT.Itprovidedadditionalincentivestosmallproducersandexplorersbycreatingafundforoilandgascreditcashpurchasesandeliminatingthe$25millionannualcaponcashpurchasesestablishedbythePPT.87RepresentativesforthemajoroilproducersallopposedACES.Theygenerallysaidthat,whiletheyconsideredtheexistingPPTtaxratetobetoohigh,makingchangestothetaxstructurewouldcreatefiscalinstabilitythatwouldaffecttheirdecision-making.TheproducerscontendedthatACESwoulddiscourageinvestmentinboththelegacyfieldsandexplorationanddevelopmentofnewfields.ABPrepresentativesummeditupthisway:“Thisisaboutinvestment,tostemdecline.Thebarrelsaregettingharder;technologyisneeded,moreinvestmentisneeded.Economicswillgetworseifthetaxincreases...”88SmallerindependentcompaniestestifiedinsupportofleavingthePPTinplaceandmaintainingastabletaxpolicy.Thoughtheyappreciatednewprovisionsthatfavorednewentrantsandsmallercompanies,itwastheirpreferencethatthePPTbeleftalone.ThepoliticalclimateintheOctober2007specialsessiononACESwasfardifferentfromthe2006PPTsessions.InSeptember2007,Rep.Kottwasfoundguiltyofcorruptionandsentencedtosixyearsinprison.Rep.Kohring’strialwasongoingandgrainyblack-and-whiteFBIsurveillancevideosofVECO’sBillAllenhandinghimhundreddollarbillswereinthenews.AndPalin,maintainingheranti-corruptionandanti-corporatepolicy,hada90percentapprovalrating.TherewasalsoachangeintheSenate.Afterthe2006election,SenatePresidentBenStevens,alongwithhistiestoVECO,wasgone.AllnineDemocraticsenatorsandsixoftheelevenRepublicansputasidetheirdifferencesandformedtheSenateBipartisanWorkingGroup.From2006through2012,theWorkingGrouphadamoderatinginfluenceonlegislativedecision-making.ACESpassedboththeHouseandSenatewithrelativelylittledrama.ThefinalbillincreasedrevenuetothestatealmostfourtimesmorethanGovernorPalin’soriginalproposal.Among
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otherchanges,thebillraisedtheprogressivityfactortocapturemorerevenueforthestateathighoilprices.Inmakingtheamendmenttoincreasetheprogressivityfactor,Rep.MikeKellyexplainedthatitwasaboutgettingthestatevaluefortheproductandresourcesandrebuildingthetrustofthepeopleofAlaska.89OilandgascompanieswerenotpleasedwiththeoutcomeofACES,oftensayingthattheprogressivityfactortooktoolargeabiteoutofcompanyprofitsathighoilprices.From2007until2012,theymaintainedthoseobjections,exceptin2009whenoilpricesplummetedandtheproductiontaxratedecreased.Thestate’slowertaxhelpedbufferthecompaniesfromlosseselsewhere.After2009,aspricesbeganclimbingintothe$100range,oilandgascompaniesrenewedtheircomplaintsaboutACES.
***
In2009,LieutenantGovernorSeanParnellsucceededGovernorPalinwhensheresignedinJulyofthatyear.Upontakingoffice,GovernorParnellmaintainedsupportfortheoilandgasproductiontaxsystemoverall,includingtheprogressivityprovision,sayingtheadministration’sdiscussionswithoilcompaniesfailedtoproduceevidencethatchangeswerenecessary.“I’mnotinterestedinchangingprogressivityso[thecompanies]cantakethatmoneyandinvestitsomewhereelse,”Parnellsaid.“Ifthey’rewillingtoinvestithere,I’mopentoconsideringit,butI’mstandingupforAlaskansinthis,notsomeothercountry.”90In2011,followinghiselectioninthefallof2010,GovernorParnellreversedhissupportforACES.Hesoonputforwardlegislationthatproposedchangingthetaxsysteminawaythatwouldreducestaterevenueathighoilprices.TheHouseRepublicanmajoritywasamenabletothegovernor’sproposal.HouseSpeakerMikeChenault,R-Nikiski,saidthat“anumberofusfeelandhavefeltsinceACESwaspassedthatitisanunfairtaxandthatneedstobeaddressed.”91OvertheobjectionsofminorityDemocrats,theHousepassedaversionofthegovernor’sproposalthatwasestimatedtoreducerevenuetothestateby$5.6billionforthefirstfiveyearsiftherewasnonewproduction.Ifoilproductionrosefivepercentfromtheforecasts,thereductioninrevenuetothestatewouldbe$4.9billionoverthesameperiod.TheSenateBipartisanWorkingGroupdidnottakeupthelegislationpassedbytheHouseoutofconcernthestatewouldlosetoomuchrevenueandgettoolittleinreturn.ACESremainedineffectthrough2012.92
***Thestartofthe2013legislativesessionmarkedanotherchangeinAlaskanpolitics.ThePPTcorruptionscandalwasmostlyforgotten.TwosittingsenatorswereactivelyemployedbyConocoPhillips.GovernorParnellalsoonceworkedforConoco.HouseSpeakerMikeChenaultwasaformerownerofanoilfieldservicecompany.Severalotherlegislatorsweremarriedtooilandgasindustryemployees.RepublicansheldmajoritiesinboththeHouseandtheSenate;theSenateBipartisanWorkingGroupwasnomore.
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Withalegislativemajoritysupportiveofhispolicies,GovernorParnellintroducedanewoilandgasproductiontaxbill,SB21.Thelegislationproposeda25percentflattaxrate,eliminatedprogressivity,eliminatedthe20percentqualifiedcapitalexpenditurecreditforNorthSlopeprojects,amendedothercreditstobecarriedforwardtowhentherewasproduction,retainedtheACESminimumtaxfloor,andprovidedforagrossvaluereductionthatallowedtwentypercentof“newoil”tobetax-freeindefinitely.AtthetimeofSB21’sintroduction,oilpriceswerearound$90perbarrel.NorthSlopeproductionwasaround534,000barrelsperdayandthedeclineratecontinuedtoaveragesixpercentperyear.Inanewdevelopment,Lower48oilproductionwasboomingwiththeadventoffrackingtechnology.Theadministration’sstatedimpetusforthetaxchangeswasadesiretoarrestthedeclineinoilproductionandgetmoreoilflowingintheTrans-AlaskaPipelineSystem.ParnelladministrationofficialsfeltAlaskawaslaggingbehindotheroilstateslikeTexasandNorthDakotawherenewunconventionalandshaleoilplayswereincreasingproductionexponentially.TheofficialssawAlaska’sproductiontaxstructureasabarriertomakingAlaskamorecompetitiveandincreasingNorthSlopeoilproduction,particularlyACES’highprogressivetaxrateathighoilprices.Theadministrationwasalsoconcernedthatthestate’sinvestment-basedtaxcreditswerecostingthestatebillionsandnotleadingtomoreproduction.Thestatehadpaidoutalmost$6billionintaxcreditstodate.Almost$1billionofthosecreditswenttocompaniesthathadnoproduction,andnotaxliabilitytoapplythecreditsagainst.Asthestateanalyzedwhatitwasgettingforthe$6billion,theyfoundnodirectconnectiontofutureproduction.93TheoilandgascompaniesgenerallysupportedSB21,especiallytheeliminationoftheACESprogressivityprovision.Whilesupportiveofthegrossvaluereduction,majorproducerswereconcernedthatitappliedonlytonewproduction.ThecompanieswantedthesameorasimilarincentivetoapplytotheoldgiantsPrudhoeBayandKuparukaswell.TheyemphasizedthatthelegacyfieldswerekeytooffsettingtheNorthSlopedeclineinoilproductionandhadthegreatestinvestmentopportunities.Largeandsmallcompaniessoughtcontinuingincentivesforbothnewandoldfields,andsupportedextendingexistingincentivesforsmallproducersandexplorationactivities.94OpponentsofSB21arguedthatwiththelossofaprogressivetaxrate,thestatestoodtolosebillionsinpotentialrevenuewhenoilpriceswerehigh,astheywereatthetime;theydescribedthelegislationasa“giveaway”bothbecauseofthelossofprogressivityandbecauseaslower-taxednewoilreplacedoldoilproduction,thestate’sshareoftheprofitswoulddecreaseindefinitelyintothefuture.Newoilincludedoilfromfieldscreatedafter2003.Overtime,anincreasingpercentageofoilwouldqualifyforthenewoiltaxbreaksthatwouldbeappliedforthelifeofoilrecovery.
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DuringboththeHouseandSenatedebatesonSB21,legislatorsofferedmultipleamendmentsinanattempttoaddressconcernsraisedbythelegislation.Allfailed,largelyalongRepublicanmajority/Democraticminoritylines.ThefinalversionofSB21passedonApril14,2013.ThelegislationeliminatedtheACES’progressivityprovisionandtheNorthSlopequalifiedcapitalexpenditurecredits.ItincludedagrossvaluereductionwheretwentytothirtypercentofnewoilontheNorthSlopewouldbetax-freeindefinitely.Toprovideamildlyprogressivetaxstructure,SB21addeda$5perbarrelcreditfornewoilincombinationwithahighertaxrateof35percent.Thiscreatedasortofreverseprogressivity;asoilpricesdecreased,thetaxreductionwouldincrease.Becauseitwasnotpracticaltoapplythegrossvaluereductiontoexistingfields,SB21addedaNorthSlopesliding-scaleperbarrelcreditthatappliedtoproductionfromfieldsthatdidnotqualifyfornewoilincentives.Foreachbarrelofoilproducedfromthesefields,theproducingcompaniesqualifiedforataxreductionrangingfrom$8perbarrelwhenthegrossvalueofoilwas$80orless,to$1perbarrelbetween$140and$149grossvalue,andzeroafterthat.Likethe$5credit,thesliding-scaletaxreductionaddedaprogressiveelementtothetaxstructure.Applicationofthereductionmeantthatthe35percenttaxratewouldbereachedonlyatveryhighoilpricesstartingaround$160perbarrel.In2013,publicdissatisfactionoverthenewtaxsystempromptedacitizens’referendumtorepealSB21andreturntoACESinitsentirety.Theproponentsofthereferendumgatheredapproximately50,000signaturesfromaroundthestate,20,000morethanrequired.SupportersofthereferendumarguedthatSB21gaveawaybillionstotheoilindustryathighoilprices,andthatsincethegeneroustaxcreditsdidnotrequireinstateinvestment,companieswouldspendtheirextraprofitselsewhere.TheycontendedthatACEShadworkedtoincreaseoilindustryinvestmentinAlaska.OpponentstothereferendumarguedthatSB21wasworkingtoincreaseAlaskainvestmentandwouldincreasestaterevenueoverthelongtermbyincreasingproduction.Thevoteyescampaignraised$650,000insupportoftheirefforts.Thoughanimpressiveamount,theywereoverwhelmedbythe$20millionraisedbythoseagainstthereferendum.BP,ExxonMobilandConocoPhillipscontributedacombined$10milliontotheVoteNocampaign.BallotMeasure1wasontheAugust19,2014primaryballot.Themeasurefailedbyavoteof99,855(52.7%)againsttherepealofSB21and89,608(47.3%)votingfortherepeal.
***The2014generalelectionbroughtyetanothernotablechangetoAlaskapolitics.BillWalker,aRepublicanturnedIndependent,wonthegovernorshipwithByronMallott,along-timeDemocrat,runningwithhimaslieutenantgovernor.BothsupportedACESoverSB21.Asa
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lawyerinprivatepractice,Walkerhadahistoryofrepresentingcommunityandpublicinterestsinlitigationagainstthestateandoilandgascompanies.WiththedefeatofthereferendumtorepealSB21,GovernorWalkercommittedtohonoringthepublic’svoteandleavingtheoilandgasproductiontaxsystemintact.Thisresolvewasalmostimmediatelychallengedwhen,in2015,oilpricesdroppedfromover$100perbarreltobelow$40perbarrel.Inthefaceofa$4billiondeficit,thestatecouldnolongeraffordallthetaxcreditincentivesofferedaspartofAlaska’soilandgasproductiontax.TaxcreditswereacriticalcomponentofthePPTintroducedin2006.Thecreditswereintendedtoencourageinvestmentintheexplorationanddevelopmentofnew,smallerconventionaloilfieldsanddevelopmentoftechnicallychallengedunconventionaloil,suchasheavyoil,intheoldlargerfields.Overtheyears,asoilproductionontheNorthSlopedeclinedandCookInletoilandgasexplorationstagnated,moreincentiveswereaddedtothetaxstructureandexistingtaxcreditsincreased.Highoilpricesallowedtheadditionofnewtaxcreditswithoutconsiderationoftheircumulativeimpacttothestate’sproductiontaxrevenue,particularlywhenoilpriceswerelow.Thebiggesthittothestatetreasuryin2015wasataxcreditpurchaseprogramfirstestablishedin2006underthePPT.Becauseexplorersandsmallproducerswouldnotproduceenoughoilorgastohavemuchofataxliabilityagainstwhichtoapplytheirtaxcredits,thePPTlegislationallowedcertaintaxcreditstobetransferredandtradedontheopenmarket.Sincethemarketwaslimitedtothethreemajoroilproducers,independentcompanieswereconcernedtheywouldnotreceivefullvaluefortheircredits.TheyaskedthelegislaturetoestablishapurchaseprogramunderthePPTwherethestatewouldpaycashfortheircreditsupfront.Senatorsatthetimewereskepticalaboutthecashpurchaseidea.SenatorConBundy,R-Anchorage,saidthathe“cringedatthethoughtofthenewspaperheadlinesweretheStatetowritehugecheckstotheoilandgasindustry.”TheSenateversionofthePPTthatwastransmittedtotheHouseforconsiderationduringthe2006regularsessiondidnotincludeacashforcreditpurchaseprovision.95DuringHouseFinanceCommitteeconsiderationoftheSenateversionofthePPTlegislation,committeememberRep.MikeHawker,R-Anchorage,proposedinsertingthecashpurchaseprovisionintotheHouseFinanceversionofthebill.Murkowskiadministrationofficialscautionedthatifoilpricesfell,thestatewouldbeonthehooknotonlyfordecreasingrevenues,butalsoforthepurchaseoftaxcredits.Theofficialsurgedseriousconsiderationofthepossibilitythatoilpricescouldfallfastwithanequallyswiftdeclineinrevenue.Rep.Hawkercounteredthatwasanunlikelyscenarioandthathedidnotthinkthestateexposurewouldbethatgreat.Heemphasizedthebenefittothosemakinginvestments.96ThefinalPPTlegislationendedupincludingaprovisionforthestatetoprovideforthepurchaseofcertaintaxcredits.Becauselegislatorsandadministrationofficialsworriedaboutthepotentialimpacttostaterevenueshouldoilpricesdrop,purchaseswerelimitedtocompanies
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producingnotmorethan50,000barrelsofoilperdayandtherewasa$25millioncappercompany.Inaddition,anapplicantwasrequiredtoincuraqualifiedcapitalexpenditureorbethesuccessfulbidderforastateoilandgasleasewithin24monthsafterapplyingforatransferabletaxcreditcertificate.Thepurchasepaymentcouldnotexceedthetotaloftheexpendituresorbid.In2007,ACESestablishedanoilandgastaxcreditfundasawayforthestatetopurchasequalifyingcreditsmoreefficiently.Theamountofmoneyavailabletothefundwasbasedonapercentageofproductiontaxrevenue.The$25millioncapestablishedunderthePPTwasrepealedbecausesmallproducersfoundthecaptobetoolow.Inresponsetolegislators’questionsregardingwhatwouldhappentothefundifoilpricesdropped,anadministrationofficialexplainedthatregulationswoulddeterminehowtoallocatepaymentswhentherewasaninsufficientfundbalance.Hesaid,“alongperiodoflowpricescouldleadtoinsufficientmoneyinthefundafterlotsofcreditshavebeenpaidout,andthelegislaturemightchoosetonotspendthemoneyoncredits.”Hestatedthatremainingcreditsnotpurchasedbythestatecouldeitherbecarriedforwardortransferredtoanothertaxpayerwhohadsufficienttaxliability.972010sawafurthereasingofrestrictionsonthecashpurchaseprogramwiththerepealoftheinvestmentrequirementtoqualifyforstatepurchaseofcredits.Alsoin2010,thelegislatureaddednewtaxcreditsthatcouldbepurchasedbythestate.In2013,anamendmenttoafishtaxbillallowedfortheassignmentofpurchasableproductiontaxcreditstoathird-partyassignee.Thismeantcompaniescouldusetheirtaxcreditsascollateralforloansorsellcreditstoabankorinvestmentinstitution;thestatewouldthenpaycashdirectlytotheinstitutionholdingthecredits.TestimonyindicateslegislatorsbelievedtheamendmentappliedonlytoareasoutsidetheNorthSlope,andonlytogas.However,thelanguagethatpassedhadnolimitinglanguageandappliedstatewideforanyactivity.Thattheamendmentwasofferedat1:00a.m.threedaysbeforetheendofthelegislativesessionmayaccountfortheconfusion.98Theestimatedamountneededforstatepurchaseoftaxcreditsgrewfrom$180millionin2009to$700millionin2015.Asoilpricesplummeted,fearsofthestatewritingmulti-milliondollarcheckstooilandgascompanieswhilepublicserviceswerebeingcutwererealized.Thestatewasreceivinglessinoilandgasproductiontaxrevenuethantheamountneededtopurchasecredits.In2015,inresponsetothebudgetcrisis,GovernorWalkervetoed$200millionofthe$700millioncreditpurchaseappropriationforfiscalyear2016.Forthefiscalyear2017budget,hevetoed$430million,leavingthe$30millionrequiredbythefundingformulafortheoilandgastaxcreditfund.Underthelaw,availablefundswouldbeallocatedamongcreditpurchaseapplicants.In2016,theadministrationintroducedabilltomodifytaxcreditprogramsandhelpeasethepressureonfuturestatebudgets.EvenstalwartsupportersofSB21recognizedtheneedforchange.Thelegislation,HB247,passedthelegislatureneartheendofthe2016legislative
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session.HB247phasedoutCookInlettaxcreditsby2018;halvedcreditsfortheregionoutsideCookInletandtheNorthSlope;placedanannualcaponpurchasabletaxcreditsupto$70million;andsettimelimitsonhowlongnewoilwouldqualifyforagrossvaluereduction.
***In2017,forthefirsttimeintwenty-fouryears,DemocratswereinaleadershiproleintheHouse.ThreeRepublicansandtwoIndependentsjoinedseventeenDemocratstoformamajoritycoalition.TheSenateremainedinRepublicancontrol,withamajorityoffourteenRepublicansplusoneDemocrat.TheprimaryaimoftheHousecoalitionwastofindawaytodealwiththestate’sfiscalcrisis,includingaddressingremainingoilproductiontaxissues,particularlytheproblemofpurchasabletaxcredits.Around$900millionintaxcreditpurchaseapplicationswerependingwiththepotentialforbillionsmoretoaccumulateincomingyears.Usually,thegovernorintroducesmajoroiltaxlegislation.However,whileGovernorWalkerwasopentochangestotheoiltaxstructure,hisadministrationwasconcentratingitseffortsonafiscalplan.Thisleftittothelegislaturetodecidewhat,ifanychangestointroduce.ThetaskofdevelopingabillfelltotheHouseResourcesCommitteechairedbyReps.GeranTarrandAndyJosephson,bothAnchorageDemocrats.OvertheprotestsofRepublicanminoritymembers,thechairsintroducedHB111asaHouseResourcesCommitteebillonFebruary8,2017.Amongotherthings,thebilleliminatedstatepurchaseoftaxcredits.99OnApril11,2017,followingweeksofhearings,theHousepassedabillthatfundamentallyrestructuredtheSB21productiontaxstructure.Amongotherthings,thefinalHouseversionofHB111eliminatedNorthSlopepurchasableannuallosscredits;allowedannuallossestocarryforwardtowhentherewastaxableproduction;increasedpubliclyavailabletaxpayerinformation;repealedtheslidingscaleperbarrelcredit;loweredthetaxratefrom35percentto25percentinconjunctionwithgettingridoftheslidingscalecredit;andaddedasupplementaltaxbracketthatwouldincreasethetaxrateby15percentathigheroilprices.Oilandgascompaniesuniversallycriticizedthelegislation.Themajorproducers,ExxonMobil,BP,andConocoPhillips,arguedthattheslidingscaleperbarrelcreditwasanintegralpartofthetaxsystem,thatSB21wasworkingtostimulateinvestment,andthatHB111woulddiscouragefutureexplorationandproduction.100Independentexplorersanddevelopersfelttheywouldbeparticularlyhardhitbythelossofcashpaymentsforannuallosscredits.Annuallossesareleaseexpendituresthatwouldbedeductibleagainstataxpayer’staxobligationexceptwhenthedeductionwouldcausethetaxtobelessthanzero.Generally,underanetprofitsystem,unuseddeductionsarecarriedforwardtowhenthereistaxableproduction.UniquetoAlaska,apercentageofunuseddeductionscouldbeconvertedtoanannuallosscreditandpurchasedbythestate.This
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allowedsmallcompaniestobenefitfromallowabledeductionsimmediatelyandnothavetowaituntiltheyhadcommercialproduction.Italsoputthestateinthepositionofpayingforcreditsaccruedonprojectsthatultimatelywentbankruptorcameupwithadryhole.TheHouse’sgoalsfortheoiltaxrevisionweretoenhanceandprotectstaterevenueandmovetowardasimpler,moreself-adjustingtaxsystem.WhentheSenatetookuptheHouseproposal,therewasagreementoneliminatingthepurchasabletaxcredits.However,thegoalsannouncedbySenateResourcechairCathyGiessel,R-Anchorage,weretominimizechangestotheexistingtaxsystemasmuchaspossible,andreducetheexistingpurchasablecreditbacklog.ThefinallegislationpassedbytheSenaterejectedalmostalloftheHouseprovisionsandconcentratedoneliminatingpurchasablecreditsandestablishingalternatemeansforcompaniestorecoupvaluefromtheirexistingpurchasabletaxcredits.TheSenatepassedtheirversionofHB111onMay15,2017onavoteof14to5.ThesessionendedtwodayslaterwithoutanyreconciliationbetweentheHouseandSenatebillversions.AnotherattemptfailedduringaspecialsessionthatstartedimmediatelyaftertheregularsessionandendedJune16.GovernorWalkercalledasecondspecialsessionstartingassoonasthefirstspecialsessionended,thistimewithafocusontheoiltaxlegislation.Ittookamonth,buttherewasfinallysuccessneartheendofthe30-daysallottedforthespecialsession.ThoughitmeantgivingupmanyoftheirproposedchangestotheSB21taxsystem,theHousemajorityagreedtoacompromisebrokeredbyRepresentativesTarrandJosephsonandSenatorGiessel.Thefinallegislationrepealedtheannuallosscreditsstatewide;limitedstatepaymentsforpurchasabletaxcreditstocreditsissuedforworkperformedbeforeJuly1,2017;andallowedtaxpayerswithoutstandingpurchasabletaxcreditstousethecreditstosatisfyothertaxobligations.Inplaceoftheannuallosscredits,HB111allowedcompaniesoperatingoutsideCookInlettocarryforward100percentoftheirannuallossestowhenthecompanyhasproduction–thevalueoftheannuallosswoulddecreaseinvalueby10percent,startingafterthetenthyearonnon-producingleasesandtheseventhyearonproducingleases.HB111leftintactthesliding-scaleperbarrelcreditthatmainlybenefittedthemajorproducers,andthegrossvaluereductionand$5perbarrelcreditforqualifiednewoil.TheseandotherSB21provisionsremainedissuesfortheHousemajority.Aspartofthecompromise,provisionwasmadeforalegislativeworkinggrouptoanalyzeandreviewthestate’soilandgastaxstructureanddeveloptermsforacomprehensivefiscalregime.Thecompromiselegislationpassedwith33legislatorsvotingyesintheHouseand18yeasintheSenate.Itwasabreakthroughinayearwhenstateandnationalpoliticsseemedhopelesslymiredinpartisanpolitics.
***
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In2019,seventyyearsafterGovernorGrueninginstitutedAlaska’sfirstcomprehensivetaxsystem,Alaskaisonceagainonthebrinkoffinancialdisaster.Likeinterritorialdays,Alaskacurrentlylacksastateincometax.Theincometaxfirstinstitutedin1949wasrepealedin1980becauseoftheinfluxofoilmoney.Sincethen,fundingforstategovernmentservicesandinfrastructureremainslargelydependentonrevenuefromtheoilandgasproductiontaxandleaseroyalties.Theresultisstatebudgetsasvolatileasoilprices.Thoughoilpricesin2019arehigherthanthebigdivein2015,theyremaininthe$60rangeandthestateistakinginlessrevenuethanneededtofundstatepublicservices.Toclosea$1.6billiondeficitandmakegoodonacampaignpromisetopayAlaskansfulldividendsfromthePermanentFund,thestate’soilrevenuesavingsaccount,Alaska’snewgovernor,MichaelDunleavy,proposedmassivecutstopublicservicefunding.WerethelegislaturetoadoptDunleavy’sproposedbudget,therewouldbedevastatingreductionsinhealthcareservicesandpubliceducation,severalUniversityofAlaskacampusesmighthavetocloseandthestateferrysystemcouldbeshutdowncompletely.Ruralareaswouldbehithardestwithevenfewerpublicsafetyofficers,higherenergycosts,andanendtolocaloilandgaspropertytaxes.Publicoutcryoverthegovernor’sproposedbudgetincludescallsforchangestothestate’soilandgasproductiontax.ThereremainsthebeliefthatthesystemenactedundertheParnelladministrationin2013hasshort-changedAlaska.Withoilpricesremaininglow,majoroilproducerscanclaimthemaximumtaxreductionof$8perbarrelproducedunderthesliding-scalecreditforthelargelegacyfieldsandpayaneffectivetaxrateatorneartheminimumfourpercentgrossvaluetax.Newfieldsbenefitfromthegrossvaluereductionand$5perbarrelcreditforqualifiednewoil.Stilllackingisquantifiableevidencethattaxincentivesinduceadditionaloilproductionfromexistingfieldsornewexplorationandproduction.Purchasabletaxcreditscontinuetoloomasanissue.AsofJanuary30,2019,thetotalofrequestedtaxcreditsforpurchasewasaround$837million.In2018,thelegislatureapproved$100millioninpayments.GovernorDunleavy’sproposedbudgetincludedanother$254millionincreditpaymentstobesplitbetweenthecurrentfiscalyearandthenextthatbeginsJuly1.ThatoiltaxreductionsremaininplaceandthatthestatecouldpayouthundredsofmillionstooilcompaniesorlendinginstitutionswhilepublicservicesareguttedisfuelingtheireofmanyAlaskans.WhetherthatresultsinanotherroundofchangestoAlaska’soilandgasproductiontaxremainstobeseen…
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ENDNOTES1“MessagetothePeopleofAlaska;AReportontheNineteenthTerritorialLegislaturefromGovernorErnestGruening,”April1949,16.2ErnestGruening,ManyBattles:TheAutobiographyofErnestGruening(NewYork:Liveright,1973),297-298.3“SaysAlaskaNearsUnprecedentedOilProspectingEra,”FairbanksDailyNews-Miner,January20,1954.4“McCutcheoninsistspropertytaxmustbeonappropriation,”DailySitkaSentinel,March29,1955,1.5Chapter7ESLA1955.6“TheNewTaxOnOil,”AnchorageDailyTimesEditorial,April9,1955,6.7Clubmembersincluded:ElmerRasmusson,WilburWester,WillardNagley,GeorgeJones,C.R.Foss,JohnMcManamin,RodneyJohnston,PhilandRayRaykovich,HowardCarver,GlennMiller,andFredAxford;Naske,“Alaska;AHistory,”326.8“OilandDollarsFlow;Epilogue:Upshotofoilleasedeal,”AnchorageDailyNews,DavidPostman,February11,1990.9“Oil,GasOfficialsZeroingonSkinner,”FairbanksDailyNews-Miner,March1,1966,1.10Id.;“OilOfficialsSeeSkinner’sTaxHikeHittingNorthSlope,”FairbanksDailyNews-Miner,March3,1966,1;HouseResolution3,1965.11HouseBill15andHouseBill12,1967.12“FloodTaxFoesLoseonBallot,”FairbanksDailyNews-Miner,October2,1967,8;“SmithBidsRepeal2TaxLaws,”JoeLaRocca,FairbanksDailyNews-Miner,October12,1967,1.13Id.;“6-DaySessionResult:$15MillionforAid,”FairbanksDailyNews-Miner,October4,1967,1.14“OilTaxHikeBillsEntered,”FairbanksDailyNews-Miner,January25,1968,3;“21BackHigherOilTax,”FairbanksDailyNews-Miner,January26,1968,1;“FinkandStrandbergClashOverOilTax,”FairbanksDailyNews-Miner,February27,1968,6.15“OilandGasHearings;HouseandSenateFinanceCommittee;February19-20,1968,”AlaskaLegislativeCouncil,LegislativeAffairsAgency,October1968,17-31(LegislativeLibraryCatalog#6800140).16“OilandGasHearings,”February1968,50.17“MoveAfoottoTieUpBudgetBill,”FairbanksDailyNews-Miner,March19,1968,1;“OilTaxHikeSeenCertainNow:AdjournTargetIsAprilFool’s,”FairbanksDailyNews-Miner,March22,1968,1.18SB399;“LegislatureinAngryFinale,”FairbanksDailyNews-Miner,April16,1968,7.19“Oilboombillbringinfluxofoillobbyiststolegislature,”DailySitkaSentinel,January16,1969,2;“ReviewoftheAlaskaTaxStructure,Peat,Marwick,Mitchell&Co.,December31,1968,IV-20to23(LegislativeLibraryCatalog#6800170).20HB75;“Oil-GasSeveranceBillBeforeHouse,”FairbanksDailyNews-Miner,January31,1969,1;“FinkSaysProposedTaxBillMakesAlaskaLiketheOthers,”FairbanksDailyNews-Miner,February21,1969,6;“HouseApprovedSeveranceBillReferredtoThreeSenateUnits,”FairbanksDailyNews-Miner,April9,1969,3;“OilLeaseSaleKeytoRevenue,”FairbanksDailyNews-Miner,May1,1969,1.21“HouseConcernedbySeveranceLag,”FairbanksDailyNews-Miner,April25,1969,2.22Naske,Alaska:AHistory,322;“’Oil-laska’NowFinancialGiant,”FairbanksDailyNews-Miner,September11,1969,1;“FirstPipeShipmentSaturday,”FairbanksDailyNews-Miner,September11,1969,1.23GeoffreyT.Bleakley,“APolicyHistoryofAlaskaOilLandsAdministration,1953-1974”(PhDdiss.,WashingtonStateUniversity,May1996),206-208;“Senateapprovesroad,setsfunds,”FairbanksDailyNews-Miner,May22,1970,1;“Millersaysearlyroadstartwillspeedpipeline,”FairbanksDailyNews-Miner,May27,1970,1.24“Severanceentanglementdelayswindup,”FairbanksDailyNews-Miner,June5,1970,1;“Slidingscaleseverancetaxadoptedaftermuchdebate,”FairbanksDailyNews-Miner,June8,1970,3.25HouseBill75,Ch.247,SLA1970.26“Approvesroadnorth,budgetof$314millionbeforeend,”FairbanksDailyNews-Miner,June8,1970,1;PeterA.Coates,TheTrans-AlaskaPipelineControversy,UniversityofAlaskaPress,1993,250.27“Gov.Eganfearsstateoilrevenueloss,”FairbanksDailyNews-Miner,March3,1972,1.28“Consultantcitesreasonsforstatelineownership,”FairbanksDailyNews-Miner,March7,1972,5.29“Lineright-of-wayclearsSenate,”FairbanksDailyNews-Miner,April18,1972,2.
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Egan,”FairbanksDailyNews-Miner,May22,1972,2.30“Eganasks47.3centsabarrelonoilseverance,”FairbanksDailyNews-Miner,April27,1972,3;“Egansaysbarreltaxonoiltoallowprofit,”FDNM,April28,1972,9.31“Oilindustrypressureendangering‘leasingbill’passage,”FairbanksDailyNews-Miner,May15,1972,8;“EganplansNorthSlopetalk,”FairbanksDailyNews-Miner,May18,1972,1;“Egansqueezesoutoillegislation,”AnAPNewsAnalysis,FairbanksDailyNews-Miner,June2,72,2.32Ch.101SLA1972(FCCSHCSSB168)–relatingtooilandgasrevenues;Ch.72SLA1972(FCCSHCSCSSB294)–Right-of-wayLeasingactof1972;“Oilcompaniessueoverright-of-way,barreltax,”FairbanksDailyNews-Miner,September12,1972,1.33“Newoillawsawaitsuperiorcourtruling,”FairbanksDailyNews-Miner,January6,1973,5.34JoeE.LaRocca,AlaskaAgonistes;TheAgeofPetroleum;HowBigOilBoughtAlaska(ProfessionalPress,ChapelHill,NorthCarolina),60.35“Gov.Eganfearshassleifoilimpactentered,”FairbanksDailyNews-Miner,September29,1973,1.36“Topoilcompanylobbyistsaysproblemsaresolved,”FairbanksDailyNews-Miner,November13,1973,2.37AlyeskaPipelineFacts,http://alyeska-pipeline.com/TAPS/PipelineFacts,January1,2017.38“Hammondwantslegislaturetodelayactiononoiltaxes,”FairbanksDailyNews-Miner,April1,1976,2.39“Adjournmentspurslegislature,”FairbanksDailyNews-Miner,April26,1976,2.40Alaska’sOilandGasStructure:AStudywithRecommendationsforImprovement,February1977,pageV-21,29.41Alaska’sOilandGasStructure,pageVI-19.42“Hammondasksoiltaxoverhaul,”FairbanksDailyNews-Miner,March8,1977,1.43“Oilindustryblastsnewtax,”FairbanksDailyNews-Miner,March25,1977,6;“Oiltaxlegislationmovesrightalong,”FairbanksDailyNews-Miner,April22,1977,2;Houseversionofseverancetaxwouldcostbigoil$400million,”FairbanksDailyNews-Miner,May7,1977,2.44“Housesetforoiltaxcollision,”FairbanksDailyNews-Miner,May16,1977,1;“Houseversionofseverancetaxwouldcostbigoil$400million,”FairbanksDailyNews-Miner,May7,1977,2.45“Hurdlestoadjournmentdisappearing,”FairbanksDailyNews-Miner,May26,1977,1.46“TheELF;APolicyPerspective,”byMaryHalloran,DivisionofPolicy,OfficeoftheGovernor,AppendixC,April1988;JointStatementonOilTaxes,March18,1981,Parts1-6,47(LegislativeLibraryCatalog#8301960).47“FiscalAnalysisofProposedIndustrySettlement,”byMiltBarker,LegislativeFinanceDivision,June12,1981;LegislativeLibraryCatalog#8301960,Parts34-38.48CapitalCommunityBroadcasting,“Capital81,”ReportersMalinJenningsandRosemarieAlexander,https://www.youtube.com/watch?v=lIHiejbdja4,June12,1981;“HouseRepublicansStageCoup;ManeuverforChair,”DailySitkaSentinel,June15,1981,1.49JohnStrohmeyer,ExtremeConditions:BigOilandtheTransformationofAlaska(NewYork:Simon&Schuster,1993),211.50Chapter116SLA1981.51AlaskaDepartmentofRevenue,RevenueSourcebooks.52“OilFirm’sContributionstoCampaignsCriticized,”DailySitkaSentinel,August7,1984,5;“VECO’sCampaignPlanSaidImproper,”DailySitkaSentinel,October3,1984,3;LarryMakinson,OpenSecrets:ThePriceofPoliticsinAlaska,(TheProjectforInvestigativeReportingonMoneyinPolitics,Washington,D.C,1986),63.53“StateDropsChargeAgainstDankworth,DailySitkaSentinel,March12,1984,1.54“OilFirm’sContributionsToCampaignsCriticized,”DailySitkaSentinel,August7,1984,5;“’BigEd’DankworthKnowsPowerPlays,”DailySitkaSentinel,July3,1990,6;LarryMakinson,OpenSecrets:ThePriceofPoliticsinAlaska:Theinsiders’guidetomoney,powerandinfluenceinthe49thState(Anchorage:RosebudPublishing,1987),96.55ARCOGivesMostToStateCandidates,”DailySitkaSentinel,March14,1986,5;“Oil,LaborLeadersinPoliticalDonations,”DailySitkaSentinel,August12,1986,3;Makinson,OpenSecrets,1987,37,68.56“ArcoLeadsPackinCampaignDonations,”DailySitkaSentinel,November4,1986,5.57Makinson,OpenSecrets,1987,112;Strohmeyer,ExtremeConditions,214-215.58InterimReportoftheHouseFinanceSubcommitteeonOilandGas,January17,1986,LegislativeLibraryCatalog#8600120.59HouseResourcesCommittee,TestimonyofHughMalone,March16,1987;CowperforDelayonOilTaxBreak,”March2,1987,1;HouseJournal,HB164Governor’sTransmittalLetter,March4,1987,391;HB164.
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60HouseJournal,HB164,April1,1987,710;SenateJournal,HB164,April6,1987,830.61“SenateSaysNotoChangesinELFTax,”DailySitkaSentinel,March9,1988,1.62“GrowingDeficitTopLegislativeProblem,”DailySitkaSentinel,January6,1989,1.63“PanelWantsChangesinOilTax,”DailySitkaSentinel,January26,1989,1.64“OilTax,EducationTopCowper’sList,”DailySitkaSentinel,January5,1989,1;Makinson,“OpenSecrets,”127.65“HouseOKsELFBill;SenatorsOpposeIt,”DailySitkaSentinel,March23,1989,1.66“AngerOverOilSpillMayShiftELFVote,”DailySitkaSentinel,April4,1989,1;“Sen.EliasonProposes:PutELFintoSavings,”DailySitkaSentinel,April17,1989,1.67“SenatePanelSendsELFBillOnItsWay,”DailySitkaSentinel,April27,1989,1;“SenatePushesHouseOnELF-PotExchange,”DailySitkaSentinel,May1,1989,1.68“SenateDoesShift,ApprovesELFBill,”DSS,May8,1989,1.69LegislativeResearchReportNumber03.250,TheEconomicLimitFactor,June17,2003.70HB441andSB321.HB441hadtwocommitteehearings;thesenatebillwasnotheard.71ChronologyofNegotiations,http://www.courtrecords.alaska.gov/webdocs/outreach/docs/scl2012-anc-exhibit2.pdf72SenateResourcesCommittee,February27and28,2006.73“Governorslamslawmakers,revealssomegasinfo,”ACitizen’sGuide,FairbanksDailyNews-Miner,March31,2006;SenateFinanceCommitteeminutes,March31,2006.74HouseFinanceCommittee,April29,2006;“25percenttoomuchrisk,”PetroleumNews,April30,2006.75GaveltoGavelArchive,May7,2006,timemark16:32.76HouseJournal,page3841.77HouseJournal,Amendment30,3911to3912and3929to3932.78HouseJournal,May8,2006,Amendment28,3925to3927;GaveltoGavelArchive,HouseFloorSession,May8,2006,timemarkstartingat104:41.79http://www.ethanberkowitz.com/speaks/Berkowitz1.pdf80CSHB3001(FIN)2006.81UnitedStatesofAmericavs.PeterKottandBruceWeyhrauch,Case3:07-cr-00056-RRB.82https://www.youtube.com/watch?v=aJh9yco8EjQ83https://www.justice.gov/archive/opa/pr/2008/December/08-crm-1139.html84“VECOofficialadmitsbribingBenStevens,”JuneauEmpire,October26,2007;AlaskaDispatchNews,https://www.youtube.com/watch?v=7RlqsF63T58,April16,2010.85“WeyhrauchPleaDealDropsFederalFelonyCharges,”AlaskaDailyNews,March13,2011;FBIpressrelease:https://www.fbi.gov/anchorage/press-releases/2011/former-alaska-legislators-peter-kott-and-victor-kohring-convicted-and-sentenced-for-public-corruption-crimes862007SpringRevenueSourcesBook,page16.87HouseOilandGasCommittee,October19,2007;HB2001/SB2001.88ExxonMobilpresentationtoHouseOil&GasCommittee,October23,2007;HouseOil&GasCommittee,October22,2007,35.89HouseFinanceCommitteeMinutes,November10,2007,8.90PetroleumNews,January17,2010.91PetroleumNews,January16,2011.92DepartmentofRevenueFiscalNoteforCSHB110(FIN).93SenateSpecialCommitteeonTAPSThroughput,January22,2013;SenateResourcesCommittee,February11,2013.94Companyviewswerecompiledfromtestimonyandpresentationsgiventomultiplecommittees.95SenateFinanceCommitteeMinutes,April12,2006,43;CSSB305(FIN).96HouseFinanceCommitteeMinutes,May5,2006afternoonmeeting,10-11and(eveningmeeting),7-8.97SenateJudiciaryCommittee,October30,2007,page24-25.98HouseFinanceCommitteeMinutes,April12,2013,4-5.99HouseJournal,February8,2017,0211.100HouseResourcesCommittee,February2017.
