Alliance Seeks To Save State Economy!

Alaska's Investment Climate and Her Children

Commentary by

Dave Harbour

Publisher, Northern Gas Pipelines

A week ago, Alaska Support Industry Alliance (Alliance) members heard a chorus of industry voices commenting on Alaska's oil and gas tax regime at their annual Meet Alaska Conference (Some of those presentations may be found in the box-right.  See Tim Bradner's opinion-NGP Photo.  Find Alliance Meeting and Vendor photos here.)

Those voices to me seemed to be saying, "Here is the effect your highest-in-the-free-world-tax-system is having on our Alaska investment policy," contrary to the more sophomoric understanding some Alaskans have that such a message is, "pure propaganda". 

The Alliance has taken a position calling for more moderate oil and gas taxes, and is attempting to communicate the importance of that message to Alaskans. Here is why we support the Alliance's call for tax restructuring.

God blessed Alaska and her residents with bountiful natural resources.  Over time, residents have alternatively respected and abused their blessings.  Alaska is currently in a cycle of abusing her non-renewable resource blessings because of a fundamental misunderstanding of her constitution and of economics.  That abuse is creating lower investment and a 4-6% annual decline in oil production at the same time the state is increasing its budgetary spending by about 9%.  This is a formula for economic disaster in the private sector, as the Alliance illustrates with its, "Faces of Aces" communications program.  A decimated private sector will carry the State's bureaucracy down with it, together with a lot of dreams.

Last September, Governor Sean Parnell correctly reminded an Alaska audience that Alaska's constitution requires resources to be made available, "...for the maximum benefit of the people."  Our main problem today is that laws seem to define "people" as today's generation, meaning that we strip every dime we can from Alaska's resources for today's generation.  If we more wisely defined "people" to include our kids and grandkids, we'd forego some rather greedy taking for benefit of the current generation in favor of creating a more sustainable and attractive investment climate that could benefit future generations as well.  If we were thinking of our kids, we'd also resist government welfare for ourselves.  This would minimize the size of a growing government that the kids will someday inherit, if they stay in Alaska. 

Alaska has become a "maximum tax"/"maximum spend"/"banana-like" jurisdiction more interested in greedily soaking every tourist with a head tax and every oil investor with a back breaking production cost burden.

Whereas Roatan, Honduras charges a cruise ship head tax lower than $10, Alaska charges $50 and adds cruel and unnecessary regulatory burdens on top of that.  Whereas Alberta, Canada learned that high petroleum taxes repelled investment and is now moderating oil and gas taxes, Alaska is still learning the hard way.  Alaskans are on a sure path toward the most severe depression of our modern history.  Our legislative acts show we are determined to leave behind a sour investment climate to chase away generations of outmigrating Alaska kids.  With an oil pipeline that is 2/3 empty, oil exploration on hold in a state 90% dependent on oil, environmental action slowing all prospective resource projects...legislative policies are putting a nail in the coffin of natural resource investment.  Cruise ships are sailing away from Alaska for friendlier climates leaving in their wakes the stranded investments of vendors, empty hotel rooms and vacant municipal coffers.

Nonaligned economists agree that Alaska has one of the worst investment climates in the entire world.  Surely the adults in our state will think of the kids.  Surely the adults will begin to look at sustainable, long term natural resource investments as a product of our own wise development of tax and regulatory policies.

The Legislature should treat tax reform of the oil and gas and cruise ship industries as its highest priorities this year.  We believe that--without going into boring detail here--the Legislature should roll back the "progressivity" feature of the production tax and reduce the percent of the take...and the complexity!  They should provide constitutional or contractual fiscal certainty to gas pipeline and other investors.  Legislators should also cut the cruise ship head tax to no more than $5 and eliminate all of the regulatory complexity and burden that accompanied its imposition by a 2006 voters initiative. These things should be done now, to avoid the economic perils which are fast approaching our drifting ship of state.

The Anchorage Daily News posted a story by Becky Bohrer this morning on this subject.  It revealed some Legislators to be truly concerned about Alaska's investment climate.  Sadly, it revealed a larger sentiment for not acting to improve Alaska's investment climate this year.  

We believe that policy makers should begin to more wisely view Alaska's constitutional mandate for using our resources to benefit Alaskans.  They should begin to vote on tax and spend legislation as if the lives of Alaskan children and grandchildren depended on those votes.  If they don't, schools, municipalities, social programs, public safety, roads, transportation and quality of life will become casualties of today's greed.  

When our policies begin to benefit this AND future generations of Alaska's people, prosperity will return, prospects for our children will flower and the world will respect Alaska as a decent destination for investment.

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