A Citizen’s Guide

To the editor:

As a new resident of this state, I’ve been reading and listening to the pros and cons of the gas pipeline contract and although I take the objections seriously, I have come to the conclusion that those interested in getting a better deal should be mindful of the fact that better is the enemy of good.

First, the objections are based on flawed assumptions:

Oil and gas contracts are not written to commit a business to spending multiple millions of its own dollars on a time line. Oil and gas contracts are written to permit a business to do so. After all, it’s their money. The reason for the contract is that the resources (oil and gas) belong to us. But these resources can’t produce revenue until businesses spend their money to make it so.

For the same reason, these contracts don’t produce specific guarantees: Of employment, of gas quantities for Alaska, of dollar amounts of tax revenue. To commit to specific time lines for construction, hiring plans, and delivery of natural gas to Alaska would be an invitation to endless litigation.

Second, much is made of the fact that the taxation plan violates Alaska’s constitution and laws. However, if this case were clear and compelling, the legislators would have already rendered their decision: a no vote.

We should keep in mind that what’s good for consumers is good for business and vice-versa. Although a fixed 30-year tax rate is better than 45 years, if the legislators can’t agree (and that’s the issue before us) then the contract should stand. By all accounts, the amount of tax revenue which the state will collect relative to net income–the standard in use for all businesses–exceeds industry norms.

Finally, since this is not a contract for performance, performance incentives don’t apply. The contract contains other incentives (critics say too many), but the bottom line is whether you trust the oil companies to actually build a pipeline once the contract is signed. The only thing we can say for sure is that if we don’t sign it, they won’t.

Christine Kluka

Fairbanks