Tax initiative certified; legal opinion cites possible problems

  • Former state Sen. Joe Paskvan, attorney Robin Brena and former state Rep. Paul Seaton are seen at a Sept. 9 press conference kicking off their campaign to support an initiative to raise oil production taxes by $1 billion to $2 billion per year. Behind them is a chart showing production tax revenue that declined as oil prices crashed from more than $100 per barrel to a low of $26 per barrel from 2014 to 2016 before rebounding to the mid-$60 range over the past year. (Photo/Elwood Brehmer/AJOC)

The omnipresent issue of oil taxes could be on Alaska ballots next year.

Lt. Gov Kevin Meyer certified the “Fair Share Act” Oct. 15. The Department of Law’s 13-page analysis of the citizens’ initiative questions how some portions of the bill would be implemented and whether or not some of it conflicts with existing state law but none of the potential snags warrant rejecting the initiative on constitutional grounds.

They are “mainly post-enactment concerns,” wrote Attorney General Kevin Clarkson and Assistant AG Cori Mills, who signed the department’s opinion.

The initiative sponsors led by longtime oil and gas attorney Robin Brena, who chairs the “Vote Yes for Alaska’s Fair Share” campaign, and state Sen. Bill Wielechowski, D-Anchorage, aim to raise roughly $1 billion per year in revenue for the state through higher oil production taxes.

They contend the Fair Share Act would raise much-needed revenue for the state, which is still facing deficits approaching $1 billion while still keeping the tax regime in Alaska’s foundational industry competitive with other oil provinces.

"The numbers show that Alaska will continue to be one of, if not the most profitable place in the world for oil companies to do business," Wielechowski said during an Oct. 16 press conference.

Industry representatives contend it would pull money from the industry that would otherwise be invested in new projects to increase North Slope oil production.

The initiative aims to raise production taxes on the largest and generally most profitable North Slope oil fields: Prudhoe Bay, Kuparuk River, and Alpine. Collectively, those fields account for nearly 90 percent of North Slope production.

The base gross minimum production tax on those fields would increase from the current 4 percent to 10 percent and step with oil prices up to 15 percent at $70 per barrel under the initiative.

The per barrel credit, a key provision of the current, contentious oil tax law known as Senate Bill 21 would also be repealed.

The Department of Law opinion states that the initiative language is not written according to normal drafting guidelines and it is not clear exactly which sections of statute it attempts to change or repeal.

“Because of these issues, the bill may not accomplish what was actually intended by the initiative sponsors,” according to the opinion. “It is also likely to lead to litigation over the meaning of the various provisions and questions of equal protection, due process, and the delegation of authority to Department of Revenue.”

In addition to raising the production tax rate, the initiative also attempts to make public more tax information filed by the producers of those fields with the Department of Revenue to allow lawmakers and the public to know how the producers of a public resource are faring economically in the state.

"Rather than partial information or misinformation, we need the best information to make decisions about our resources," Brena said regarding the disclosure of producers' tax filings.

However, according to the opinion, a general statement in the initiative language that information relating to production tax calculations “shall be a matter of public record” means much in those filings would still be confidential due to exceptions in the Public Records Act for proprietary information or balance of interests.

Brena said he was disappointed to see Law officials chose to "speculate" on the implementation of the law if it passes in their written review because that is not the department's role in the initiative process.

"In regards to their speculation, it is what it is," he said, adding that the intent of the section aimed at making producer tax records public is clear.

"I don't think there's any ambiguity in the (initiative)."

The sponsors now have until Jan. 21, the start of the next legislative session to gather 28,501 signatures collectively from 30 of the 40 state House districts to get it on a 2020 statewide ballot, according to a letter to Brena from Meyer.

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Elwood Brehmer can be reached at [email protected].

Updated: 
10/16/2019 - 12:57pm

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