Eric Forrer: How about ‘no’ to gas production tax credit?

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By ERIC FORRER

Gov. Mike Dunleavy has said that our State needs everybody to say yes to everything. For the governor’s purposes, “everything” can be defined as all industrial development.   

There seems to be a vision in the Governor’smind of a transformation from whatever Alaska was in our fond memories to a sort of northern Detroit of heavy equipment, an expanding road network, mines with attendant effluent dams, and petroleum and gas production writ large.

However, the governor is walking a pathstrewn with a lot of ‘nos.’  Consider the $70 million cuts over three years vetoed from the university in 2019.  Or how about $13 million vetoed from the ferry budget in 2020, amid other reductions. And let us not forget $87 million vetoed from legislatively approved temporary help for the public schools in 2023.   

The governor has also given a large ‘no’ to bears by sanctioning the killing of nearly 100 Browns shot by ADF&G in a single cull. Add to that the ‘no’ to wolves with half or more of the population killed in a single year on Prince of Wales Island based on biologically bogus rational supposedly toincrease the deer population.

Add to this list an existential ‘no’ to salmon(a bellwether species for the state), which are in trouble statewide with close toextinction numbers on the Yukon and Kuskokwim rivers, and a resounding “yes”to the big trawler interests based in Seattle that continue to decimate our salmon stocks and degrade the Bering Sea biosphere.

So, we find the governor’s leadership highway paved with “nos,” not just “yeses.”Our governor justifies “no” increases for funding fisheries research, “no” to wildlife scientific studies, “no” to our university, public transportation, basic level elementary school funding, and other public needs as “unsustainable increases.” He then demandsthat we Alaskans must learn to “live within our means,” an admonishment that does not extend to corporate interests inside and Outside Alaska.

But are the governor’s vetoes and downsizing of services across the spectrum really about living within our means? Does a governor who routinely proposes “unsupportable increases” in the PFD checks and calls for deficit spending really care about a ‘balanced’ budget?

In a recent article by Nathaniel Hertz in the Nov. 30th edition of the Anchorage Daily News, Governor Dunleavy is reported to be planning to reinstate something called “well head gas production tax credits.”  

Credits is the key word in this concept.

Legislation creating these kinds of credits goes back as far as Governor Frank Murkowski. These old credits were finally extinguished because of their immense cost to the public treasury (approaching eight billion dollars), and because of the credits did not increaseproduction. 

Governors Bill Walker and Dunleavy both promoted passage of HB 331, legislation that would have authorized one billion dollars in bond debt to pay off these old outstanding tax production credits, even though the payments were not debt or in default.   

In a unanimous vote in the Alaska Supreme Court, HB 331 was declared unconstitutional in its entirety.  

Had the Alaska Supreme Court not struck down the scheme to incur debt to pay off the cash-for-credit scheme, the State of Alaska would still be paying off hundreds of millions in principal and interest for a program that did not work.

The governor is seemingly prepared to slip the cost of a renewed tax credit program under the umbrella of “living within our means.”  

The implicit message here is obvious. Alaskans must make do with a double handful of ‘nos.’  But businesses involvedin exploring for gas and oil in our statedeserve a break.

There is deep, abiding hypocrisy here. The oil companies, embedded in the laissez-faire market mantra which dismisses the usefulness of government and enthrones financial and commodity markets as acontrolling force, have at no time in their existence been able to function and profit without a public fund subsidy. These subsidies have been made available by politicians at all times at every level, from infrastructure funding to loan guarantees, to price supports, ad infinitum. It’s all in the category of public risk, private profit.

Gov. Dunleavy is in lockstep with this crowd, sheltered from the needs of the people of the state under his “available resources” umbrella, and doling out state general funds in volume to private industry and its insatiable demands.   

Why the average Alaskan puts up with this kind of ruinous economic policy is a mystery.

Eric Forrer has lived in Alaska for over 60 years and is a retired commercial contractor.  He still fishes commercially and served as a Regent for the University of Alaska.  

17 COMMENTS

  1. Thanks, Eric, reading this cured my constipation. Just when I was getting too complacent by the articles printed here. Barf.

  3. Absolutely ridiculous and abysmally ignorant commentary. Comparing the old oil exploration tax credits scheme to this new production credits proposal is apples and oranges. Dunleavy’s gas production tax credit is simply an extension of the same oil production credit contained in the current SB21 oil tax scheme.

    Under SB21 we are finally seeing renewed interest in North Slope investment resulting in a halt to the production decline we saw under ACES and may soon reverse that trend and put new oil in the pipeline. Dunleavy is simply trying to duplicate the approach in Cook Inlet to incentivize investment and stem the tide of declining gas production. Without new Cook Inlet gas reserves coming on line, Southcentral Alaska will soon be importing natural gas.

    Finally, the statement that the oil companies couldn’t operate in Alaska without government subsidies is the epitome of willful ignorance. Through taxes and royalties, the Alaska government takes 2/3 of the profit from the sale of Alaskan oil. Mr. Forrer would have us believe the oil companies live off of government largesse. I assure you Mr. Forrer that the truth is the complete opposite. Alaska’s state and local governments have reaped nearly $200 billion in lease sales, taxes and royalties from oil and gas since statehood. And we’ve spent it just as fast as it came in, only saving and investing a small portion through the Permanent Fund Corporation because our state constitution mandated it.

    Issuance of a production tax credit IS NOT a subsidy. It is a lowering of the tax rate ever-so-slightly for an increase of production, thereby incentivizing more investment and higher production rates. Frankly, it’s a smart move to revitalize an old gas field clinging to economic viability. Alaskans who depend on Cook Inlet natural gas for jobs, electric generation and heat will all benefit.

    • I am glad you said it, I would have gotten finger cramps. One of my fingers is permanently distended due to expressing my opinion at the article via sign language. Ignorant disertation by a guy that can’t stand the oil business, Dunleavy or anything conservative. Don Quixote of the north, blowing through state cash fighting him and his ilk in court on every subject. Malcontent with too much time on his hands.

  5. We need every village, town and borough to contribute to the costs of local government, especially education and law enforcement. To do that we need to see residential and commercial property taxes assessed and paid in Tok, Gustavus, Bethel and Tenakee.

    We do need much smaller state and local government. Oil production has dropped by 80 percent. We have no manufacturing and no agriculture. We have too many working for government and we have too many people on the dole. Employers say they cannot hire anyone and the newspapers tell us that state government cannot sign up new SNAP recipients fast enough.

    I favor natural gas tax credits, and I favor property tax relief for Cook Inlet natural gas producers. The Kenai Peninsula Borough is trying to tax Hex out of business at the same time that state government is trying to ensure that Hilcorp has competition. It makes no sense! If you disagree please say so, and why.

  6. We get it: Development is bad, jobs are bad, economic growth is bad, Alaska being anything near self-sufficient is bad. It seems the author’s vision of Alaska’s future is as a giant national park, with a small caretaker population living off the federal teat.

    On the other hand, I applaud Ms. Downing for publishing this obviously Leftist commentary. The freedom of speech applies to everyone, and a functional society requires a free exchance of ideas rather than a system where everyone retreats into their own echo chambers.

  7. Personally I believe the State of Alaska should shut down 2 of our 3 University campuses leaving 1 well funded and adequately staffed. Keep our great community college system as the means of further education that is closest to the people.

    Alaska has got a tiny population compared to other states. If we had 3 or 4 million maybe we’d need more Universities and we’d have a tax base to pay for them. But we don’t. So we are living beyond our means. And depending on federal money is not sustainable either as the Feds have way overspent as illustrated by the extent of the accumulated federal debt.

  8. Man talk about reaching. All predator control is evaluated by one of the most respected conservation entities on the planet, Alaska Department of Fish and Game. Therefore to try and pin this logical management of predators on the Governor is pure BS, along with everything else in the article.

  9. Eric, we can agree that ADF&G is completely incompetent and needs to be shut down. Pull their funding.
    But in contrast, I believe that 100% of the funding to the University needs to be withheld. Make the University stand on its own. The cuts to public education also need to be increased. Some of that money should go to creating personal education choice, which is the future of education.
    As for resource development in Alaska, we need more of it. If you want more of something, subsidize it. If you want less, tax it.
    Surely you understand that concept.

  10. It’s beyond laughable when uneducated folk claim that the oil companies are subsidized by government. It would be shocking that such an uneducated opinion would be coming from a regent of an institution of higher learning, but given the absolutely insane nonsense coming out of these institutions it is no longer surprising.

    Oil companies subsidize all levels of government across this state and across this country. Oil is taxed when the ground it is buried under is leased, when the oil is pumped, when the oil is transported, when the oil is processed, when the oil products are transported, when they are sold, and then the profits are taxed. Many governmental levels would simply not exist in their current form if it were not for oil.

  11. The oil pays for 70% of our economy. You have been in the wheelhouse too long talking to yourself and listening to a bunch of lower 48 fishermen who rape our fishery’s and take all the money south. The left is responsible for the total failure to develop a well balanced economy. We should have a huge diverse industry in alaska after 50 years of piles of oil money. Here we sit the Cant doers like you spewing your garbage.

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