Opinion: The Fair Share Act has a data problem

Opinion: The Fair Share Act has a data problem

OK, let’s be honest.

  • Wednesday, May 27, 2020 11:25am
  • Opinion

In a recent commentary in support of a ballot initiative to raise oil taxes — the Fair Share Act — Robin Brena repeatedly invoked “let’s be honest.”

Let’s take him up on that, using citable, accurate data. For that we use the Alaska Department of Revenue Fall 2019 Revenue Sources Book. It has consistent numbers spanning multiple administrations. Readers can follow it as they read.

Brena looked at the last five years, 2015-2019. To start, as Brena cited, in that time the North Slope total market value was $57 billion. This is derived by multiplying the West Coast oil price, which is listed on Page 93, by the amount of oil production — listed on Page 97.

Brena said state oil revenues dropped when SB 21 (the current tax regime) came into effect five years ago. Looking at oil prices, they were over $100 per barrel for the years prior to 2015, and then dropped to the $50-$60 range since. Revenues dropped because oil prices dropped. They would have dropped under any tax regime.

Brena also said oil production dropped under SB 21. Looking at Page 101 of the 2013 Sources Book prior to the passage of SB 21 , production today is 100,000 barrels per day higher than what was forecasted under the prior tax regime, ACES. As a result, state revenues are higher than they would have been.

Going back to the $57 billion in value, where did it go? Page 93 shows transportation costs — pipeline and marine shipping — consumed $10 billion. Page 99 shows upstream capital and operating costs absorbed another $28 billion. This leaves pre-tax value of $19 billion.

Page 89 shows the total state petroleum revenues — taxes and royalties — plus $2.2 billion in local property tax, were $13 billion. Federal corporate income tax was about $1 billion. The combined state and federal governments received $14 billion and the producers received $5 billion.

The government received 74% of the pre-tax value. This is called the “government take,” and is what many economists use to compare taxes. Using similar calculations, the Lower 48 government take was about 64%.

This is a vastly different picture than depicted by Brena. He concluded that Alaska producers made more per barrel and paid less in taxes than anywhere else in the world. Why the difference?

Brena’s analysis has other problematic accounting perceptions. Here are a few:

• Failure to recognize royalties as payments to the government. Brena called them “part of the oil production the state keeps as rent.” In reality they are payments in either cash or oil.

• Failure to accurately compare oil profitability between Alaska and other places. Alaska operations are about 100% oil. Most other places they are about 50/50 oil and natural gas. Natural gas has about one-fifth the value of oil on a BTU basis. Comparing per unit oil operations in Alaska with combined oil and natural gas operations everywhere else is comparing apples and oranges.

• Failure to look at net revenues. Brena looks at taxes as a percentage of gross revenues, not recognizing that they include massive costs incurred by the producers, especially in a high-cost area like Alaska.

• Failure to recognize who received past credits. Brena said that during the past five years tax credits have exceeded revenues. To get to that result, you have to combine two distinct accounting ledgers. Over that period, the large North Slope producers paid more than $2 billion in production taxes, after credits. This included years when net income was negative or close to it. In those same years, there was also $2 billion in credits paid or owed to either non-North Slope producers, or small North Slope explorers. These credits were enacted under ACES and have been phased out. The oil tax initiative is directed at the large North Slope producers. If one is aggrieved by the credits paid to the others, voting for the initiative does nothing.

The Act’s rhetoric does not line up with the data. This problematic accounting could make Alaska dangerously uncompetitive. The initiative would raise taxes 150-350%, depending on price. This is what the initiative believes is fair. These accounting issues are technical and important. Alaskans should understand them before they vote.

• Roger Marks is an economist in private practice in Anchorage. He was a petroleum economist with the Alaska Department of Revenue 1983-2008 .Columns, My Turns and Letters to the Editor represent the view of the author, not the view of the Juneau Empire. Have something to say? Here’s how to submit a My Turn or letter.

More in Opinion

Web
Have something to say?

Here’s how to add your voice to the conversation.

A black bear sporting numerous lacerations on its face hunts for salmon along Steep Creek at the Mendenhall Glacier Visitors Center. (Michael Penn / Juneau Empire file photo)
My Turn: State overstepping its boundaries on wildlife predator control

In 2023 the Alaska Department of Fish and Game began a cull… Continue reading

Sen. Lisa Murkowski (R-Alaska) walks out of the Senate chamber on Capitol Hill in Washington, Feb. 20, 2025. Murkowski, who has routinely broken with her party to criticize President Donald Trump, has made a startling admission about the reality of serving in public office at a time when an unbound leader in the Oval Office is bent on retribution against his political foes. (Haiyun Jiang/The New York Times)
Opinion: Stand with Murkowski

On Monday at a summit for the Foraker Group’s leadership, Sen. Lisa… Continue reading

(City and Borough of Juneau photo)
Opinion: Juneau taxpayers fight back

The right of the citizenry to directly petition their government is often… Continue reading

(Juneau Empire file photo)
Letter: No local funds for scab labor

Using CBJ funds to help staff the Mendenhall Glacier Visitor Center and… Continue reading

Angela Rodell is a member of the Affordable Juneau Coalition and a former Juneau mayoral candidate. (Mark Sabbatini / Juneau Empire file photo)
My Turn: Juneau’s budget needs a common-sense makeover

For too long Juneau’s budgeting approach has started in the wrong place… Continue reading

(First Things First Alaska Foundation photo)
My Turn: RIP Road Scholars for Juneau Access project

The latest version of the state’s capital budget reappropriates approximately $37 million… Continue reading

President Donald Trump during a Cabinet meeting in the Cabinet Room of the White House in Washington, on Thursday, April 10, 2025. The administration says foreign governments are racing to the United States to negotiate, but exactly which countries might strike a deal — and over what — remains unclear. (Eric Lee/The New York Times)
Opinion: Cheerleading the dumbest trade war ever

In 2018, Sen. Dan Sullivan co-sponsored the STOP Act that he said… Continue reading

U.S. Sen. Dan Sullivan addresses a joint session of the Alaska State Legislature in the House Chambers on Tuesday, Feb. 7, 2023. (Mark Sabbatini / Juneau Empire file photo)
My Turn: Sen. Sullivan’s latest blabber — ‘Liberal Judges’

Two bedrock American values — equality under the law and fair elections… Continue reading

Most Read