Election

Alaska’s Oil and Identity at Stake on Ballot

In a state with an economy and government reliant on diminishing oil revenue, voters will decide whether to repeal a law that's designed to spur oil development but help the at-times corrupt oil industry.
by | August 18, 2014
The 800-mile Trans-Alaska pipeline feeds 950,000 barrels of oil a day to the West Coast.
The 800-mile Trans-Alaska pipeline feeds hundreds of thousands of barrels of oil a day to the West Coast. AP/Al Grillo

Alaska voters will decide Tuesday whether to repeal a controversial new law that's designed to spur more oil development. The question has split the state, attracted vast sums of campaign spending and been called Alaska's "second battle for statehood."

The decision will be significant for a state where oil production -- the basis for much of its economy -- has been dropping for years, while states like North Dakota and Texas have been experiencing major oil booms.

Gov. Sean Parnell championed the 2013 law known as Senate Bill 21 or the More Alaska Production Act (MAPA), that came at the behest of the oil industry. Among other major changes, the law lowered oil taxes and kept the per-barrel taxes flat, regardless of the price of oil.

It was a major departure from the approach taken by Parnell's predecessor, Sarah Palin. Although Palin enthusiastically supported oil exploration with the call to "drill, baby, drill" during her vice presidential run, her signature accomplishment as governor was the passage of a sweeping overhaul of the state's oil policy in 2007 that was less friendly to large oil companies than previous law.

So the question before Alaska voters Tuesday is essentially whether to support Parnell's industry-backed measure or Palin's more populist approach called Alaska's Clear and Equitable Share law.

The oil industry and other business groups have vastly outspent proponents of the repeal, putting $14 million into the effort compared to roughly $500,000 for the backers of the repeal. But a recent poll by Public Policy Polling showed the electorate evenly split, with one in seven voters still undecided.

Alaskans often refer to their state as an “owner state” because its constitution says state-owned natural resources -- including oil -- must be used for the maximum benefit of its people. By selling that oil, Alaska established the most important piece of its economy and the basis for funding its government. More than 90 percent of Alaska’s state government is paid for with oil and gas taxes. Residents benefit from oil-related jobs, zero income or sales taxes, and even annual rebate checks generated by money from state oil taxes.

But Alaska's oil fields have been worked for decades, and their returns are diminishing.

"Alaskans are rightfully worried that their precious resource, the thing that has been marketed to the world for so many years, is running out," said TJ Presley, the campaign manager for Vote Yes: Repeal the Giveaway.

Alaska now ranks fourth among states for oil production, trailing North Dakota, Texas and even California. Even more striking, Alaska's own production is now just a quarter of what it was at its peak in the 1980s.

Those continued declines -- even under Palin’s rewrite of oil laws -- convinced Parnell that Alaska needed to do more to attract investment, the governor wrote in a recent op-ed in the Alaska Dispatch. Oil production had been dropping between 6 and 8 percent a year under the previous law, but according to Parnell, there was no decline in the year following the passage of the new law. Plus, he wrote, the state government received more money under the new law than it would have under the old one, because of the price of oil.

“The question before Alaska voters is simple: Will our children and grandchildren inherit a state full of jobs and opportunity, or will we go back to the unsustainable path of economic decline?” Parnell wrote.

But Alaskans also have reason to be wary of the oil industry. Palin passed her law after a series of FBI office raids and arrests of state lawmakers who received illegal gifts from an oil company. Many of the targeted legislators had referred to themselves jokingly as the “Corrupt Bastards Club,” and the phrase stuck as a way to encapsulate the situation in Juneau.

Vic Fischer, a former state lawmaker, leads the campaign effort to repeal the new law. (AP/Becky Bohrer)

Fast forward to today, and the question about the oil companies is whether they will really increase production with the more generous law, said Presley, the spokesman for the repeal proponents. He said the improved production of Alaskan wells under the new law could not be tied to the new law’s incentives because it takes several years to build more capacity. Instead, he said, the oil companies may have temporarily boosted production at existing wells to bolster the case for keeping the new law.

Vic Fischer, a former state lawmaker and delegate to the state’s constitutional convention, was one of the sponsors of the repeal initiative. He called the effort a “second battle for statehood.”

“Prior to statehood, outside interests controlled Alaska's resources,” Fischer wrote earlier this year in the Alaska Dispatch. “Today, with the battle over oil taxes, we again find ourselves fighting for control of our resources.”

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