DeLena Johnson: Why Alaska should not raise oil taxes now

By REP. DELENA JOHNSON

As we chart our economic future, the contentious issue of raising oil taxes has once again reared its less than attractive head. Long reliant on income from our petroleum resources to fund state government, Alaska now stands at an important crossroads.

The majority of revenue necessary to run state government now comes from Alaska Permanent Fund earnings rather than from oil royalties. It is critical that Alaska promotes a healthy and expanding petroleum industry to reverse this dangerous trend.

While increasing oil taxes might seem expeditious in the short term, such tax hikes are analogous to winning the battle but losing the war.

Alaska competes for oil and gas investment dollars on the global market. Among the list of factors considered by potential investors, stable and predictable tax policy rates near the top. As we saw with the ‘Alaska’s Clear and Equitable Share’ (ACES) tax regime of 2008, and the ‘Petroleum Production Tax’ (PPT) before it, adjusting oil tax policy every time the state anticipates a revenue shortfall only serves to stoke investor fears of uncertainty. This uncertainty discourages new exploration and development.

With the Alaska LNG project, new oil discoveries, and a federal administration poised to approve a bonanza of projects diversifying Alaska’s economy and providing significant job creation, this is the absolute worst time to be imperiling essential investment by raising the specter of higher taxes.

Alaska is already competing with other states, such as Texas and North Dakota, which offer more favorable tax structures. Alaska needs to send a clear message: We’re open for business, ready to attract and retain investment in our oil and gas sectors now.

The global economy is still recovering from the disruptions caused by the COVID-19 pandemic and Alaska’s economy is no exception. Energy markets are experiencing more volatility due to disruptions in the middle east and the war in Ukraine. So, at a time when the energy sector is seeking stability, and with so many other places to invest, why would we risk being passed over because we increase oil taxes and exacerbate uncertainty? The answer is emphatically that we should not.

Alaska should focus on measures that stimulate growth and recovery. By incentivizing the oil and gas industry with consistent tax policy, rather than dissuading it with uncertainty, we can ensure a steady flow of jobs, investment, and revenue in the long term. This approach does not just benefit industry but provides for state-funded programs and supports the broader economy, including small businesses, and local communities.

Alaska stands at a pivotal moment. The decisions our state government makes today will determine Alaska’s economic future for decades to come. By resisting the urge to raise oil taxes and instead embracing the Alaska LNG project and other opportunities on the horizon with consistent tax policy, Alaska will position itself as a leader in the energy sector. This is a time for vision. By fostering a stable and competitive tax environment, Alaska attracts investment, creates jobs, and ensures a prosperous economy for generations to come.

Increasing oil taxes at this critical juncture would be a step in the wrong direction. Let’s reject short-term thinking and seize the opportunities ahead. If we exercise prudent restraint with oil taxation, we can and will secure Alaska’s position as a global energy leader and pave the way to a bright future for all of us.

Rep. DeLena Johnson represents District 25, including Palmer, Butte, Lazy Mountain, and the Walby Lake area.