A Citizen’s Guide

Bill Murray’s movie “Groundhog Day” reflects what it’s like waking up the day after the end of the 24th Alaska Legislature, finding the oil tax bill has gone from thunder to blunder, and a chalkboard outside the House speaker’s office says: “Day 1 of 250 days before the next session.”

Now we are gathered listening to the rollout of the “secret” gas line contract. “Is this contract in the fiscal interest of the state?” The revenue commissioner promises to make the case for affirmation over the next several days. Concurrently, the public process begins for 45 days. There will be eight full-blown hearings around the state in large communities, and many smaller villages, towns, Rotary luncheons and book clubs. The pretense here is that the administration will use the feedback to make changes to the contract. Will this be theater or a true massive economic group encounter?

The House passed an oil tax bill, the Senate scuttled it, while Hollis French-led Democrats balked that we needed to see the contract first, and the administration printed buttons with a caricature of Governor Murkowski holding a scale that said, “21.5/20 is good enough for government work!” Apparently not, and at risk is the likely disposition of a trillion dollars worth of hydrocarbon-commerce over the next 35 to 50 years. The integrity of Alaska’s economy for decades to come is at stake—a secure vessel or an imperiled sailing ship, depending on the spectrum of the debate, and where along that rainbow of opportunity each interested Alaskan finds themselves.

A gas pipeline feeding 4 billion cubic feet per day delivers 1.5 trillion cubic feet per year. We have 35 trillion cubic feet in known reserves and perhaps 200-plus trillion cubic feet when we aggregate “minimum economic fields” to form the quilt of deliverable gas to market. Our global competitor, by comparison, is Qatar, from the Middle East, with 900 trillion cubic feet sitting at tidewater. They wish to be a mega-LNG supplier to the U.S., not unlike a proposal with lesser economics but a flashy name—the all-Alaska route proposed by the Alaska Gasline Port Authority.

Bigger is better. In economics, size does matter. This isn’t about love, this is about big business. Our gas line will be the largest-ever private construction project.

At what cost does it come, this bonanza of commerce, jobs, new industry and economic vitality? The impediment ought to be insistence for “fiscal certainty on oil.” On the proposed profits-based oil tax, it’s like the three bears and Goldilocks—some voted the rate high, some voted the rate low, some tied it to the gas contract, and some said it was to replace the antiquated ELF taxing mechanism. In 1989, ELF was cutting edge. Today, it rewards Kuparuk, the second-largest oil field in North America, with a zero production tax. Zero is like ice-cold porridge. The premise behind the petroleum profits tax is noble—certainty for industry, significant augmented tax revenue for the state, a promised, signed, and delivered contract for gas and a pipe to deliver it in.

But let’s borrow an airplane analogy, which seems so appropriate a parallel given our governor’s penchant for jet travel. The “fiscal certainty on oil piece” must not be tied to the gas contract until the oil tax legislation has proven itself as a bona fide net profits tax. Even Gov. Murkowski wouldn’t lease a jet for 30 years with an untried engine and wingspan. We can’t be made public safety prisoners aboard an airframe tied to oil without escape hatches. We can’t indemnify the producers against a gas reserves tax initiative requiring us to thwart the will of the people if voted for this November (a “No” vote is recommended, incidentally). These are deal-killers and should ground our jet plane.

Responsible behavior from the Legislature dictates that we prove the economic theory of the petroleum profits tax before we chain ourselves to its economic-fiscal certainty. We need to pass a reasonable petroleum profits tax, friendly to industry, and allow exploration and development to blossom, then fold the theory into economic practice, and tie the tax to the gas line through segmented, incremental progress. Even Barry Bonds took 21 years to catch Babe Ruth. Don’t allow us to build a gas line on “fiscal certainty” steroids. Show us a signature page, a signed memorandum of understanding, a real-deal. Until then, like the punch line to the Wright brothers’ joke goes, “She ain’t never gonna fly, Orville!”

Rep. Jay Ramras of Fairbanks is co-chairman of the House Resources Committee.