A Citizen’s Guide

Margaret Russell, general manager of Seekins Ford Lincoln Mercury, cares about the oil tax legislation for lots of reasons. She wants a strong state economy because that means more people buying cars and trucks, as well as jobs for the dealership’s 120 employees.

But her strongest motivation for getting involved is a personal one.

“I want my grandchildren to still be living here and have good jobs,” she said.

The debate happening in Juneau over how much to tax oil production could mean the difference between the state enjoying oil and gas prosperity for another 15 years or another 50 or even 70 years, she said.

The governor, legislators and economists all agree that the potential impact of the legislation could be great. But as important as they say the legislation is, Alaskans seem to be puzzled by the basic facts—or at least are sufficiently confused to be hesitant about having an opinion.

Magen Siegfried, a University of Alaska Fairbanks sophomore who said she’s studied the oil tax in an economics class, admitted she didn’t understand the issue very well.

As for what would make the best oil tax, Frank McGilvary, one of several Fairbanks residents interviewed last week, isn’t sure.

“That thing seems to be so complicated, I’m not sure anybody really knows,” he said.

The state’s House of Representatives and Senate are reviewing a proposal by Gov. Frank Murkowski to change the way the state taxes oil companies. Many legislators think the state should demand more money than the governor has proposed in his petroleum production tax, but the governor and some oil companies have said that if taxes are too high, the companies could invest less money in the state, causing production to drop. That could mean less revenue for the state.

If the oil tax is too high, the three companies that have agreed with the governor to the terms of a natural gas pipeline—BP, ConocoPhillips and Exxon Mobil—could back out of the deal.

Bill Corbus, the head of the state’s Department of Revenue, touted the significance of the PPT being considered by the House and Senate in a newspaper column written in March. In terms of providing opportunities for Alaskans, he wrote, “Few, if any, proposed legislative measures are as important.”

“PPT is about extending the life of what we have today,” he wrote.

That’s what Russell is hoping for.

“My generation benefited, and we clearly are still benefiting, from the oil,” she said. “It provides jobs, and it provides quality of life.” Now natural gas could provide the same kind of prosperity for the next generations, she said.

Russell, who is tracking the bills in part because of her involvement with the Fairbanks and statewide chambers of commerce and with The Alliance, an association of oil and gas support industries, knows that money from oil production provides about 90 percent of the state’s unrestricted revenue.

It pays for government services that otherwise would likely be funded through a sales or state income tax.

“The oil industry is paying my state income tax,” she said

The oil industry has a huge effect on the state’s economy, said Doug Reynolds, a professor of economics at the University of Alaska Fairbanks.

Without that oil and gas money, he said, “The state economy would be one half or one third as big as it is.”

That means one-half to two-thirds of Alaskans simply wouldn’t be able to live here, he said. The university depends on that money, administrators and teachers are paid with it and state services rely on it.

In addition to revenue for the state, the oil industry also provides jobs, directly and indirectly. Imagine the state wants to build a road, Reynolds said. A contractor would need to hire road builders, of course, but he’d also have to hire truckers to bring in the heavy equipment and caterers to provide meals for the workers.

When all those people are done working, they’ll go home and spend the money they’ve earned.

Construction of a natural gas pipeline would, of course, mean a huge boom for the area’s construction industry, he added.

Sen. Gene Therriault, a Republican representing North Pole, said the oil industry supports many businesses in the area, including transportation and pipeline coating companies, as well as his own shop, Hector’s Welding Inc. Therriault is the Senate’s point person in the oil tax and gas line discussions.

The debate happening over oil taxation is important, he said. Significant changes to the governor’s proposed tax could make a difference of hundreds of millions of dollars to the state. Even minor changes could mean differences of tens of millions of dollars.

So do Alaskans know enough to weigh in?

It doesn’t appear so.

Therriault said he thinks it’s unfortunate the issue is so complex that it’s hard to follow on a daily basis. He said he takes it as his constitutional duty to understand it, and that he’s slowly working through the details.

The governor’s office has tried to bring people up to speed by giving talks across the state about the oil tax and the natural gas pipeline and by posting information on the governor’s Web site.

“It’s very important that Alaskans have the opportunity to learn about the details of the gas pipeline and to understand the path the state is taking,” said Becky Hultberg, the governor’s spokeswoman. She compares getting involved in the issue to voting—The governor thinks it’s very important and wants people to get involved but doesn’t mandate it.

“It’s up to individuals to what level they want to learn about it,” she said.

She said once the gas line contract is made public, the governor’s office plans to travel to different communities to answer questions about it.

“This really is a historic time for Alaska,” she said. “The gas pipeline really is the path to the future.”

Staff writer Stefan Milkowski can be reached at smilkowski@newsminer.com or 459-7577.