The only thing SB 21 guarantees is less money for our children's schools.

Reason #2: Experts Repeatedly Warned Legislators that Cutting Taxes Would Have a Negligible Effect on Production

Legislators were advised on numerous occasions by independent economists that lowering oil taxes would result in minimal increases in production.  “Severance tax rate cuts substantially reduce tax revenue collected, but yield moderate to little change in oil drilling and production activity,” cautioned Professor Mitch Kunce, author of “Effectiveness of Severance Tax Incentives in the U.S. Oil Industry.”  He emphasized that “States should be wary of arguments asserting that large swings in oil field activity can be obtained from changes in severance tax rates.”

 

Dr. Shelby Gerking echoed this warning.  In 2012, he told the Alaska Legislature that “Oil production is quite insensitive to the tax structure” and presented the following slide.  In spite of these clear warnings, the legislature passed the misguided Senate Bill 21.

Governor Parnell & his friends at Exxon want you to believe the Oil Wealth Giveaway will spur increased production.

Reason to Repeal #1 - SB 21 is based on a failed philosphy. It will NOT lead to increased production, yet will cost Alaskans billions.

Governor Parnell claims this massive giveaway will spur increased oil production.  This is his primary rationale for funneling roughly a billion dollars Alaskans would have received each year to Exxon, BP and other multinational oil companies.

However, this strategy has been shown to be ineffective in Alaska and elsewhere.  For 30 years, production taxes in Alaska were minimal.  As recently as 2006, 15 of 19 North Slope oil fields paid zero production taxes. Yet, production dropped 55% from 1988 to 2005 under extremely low tax rates.  (See http://dog.dnr.alaska.gov/Royalty/Production.htm)  Lower taxes did NOT lead to more production.  In fact, low taxes led to 1.15 million fewer barrels per day in oil production, roughly twice today’s production level.  SB 21 takes us back to a failed philosophy that has already cost Alaskans untold billions.

The following graph, prepared by Parnell Administration consultants, shows production declines from 1988 onward.  During much of this time, production taxes were extremely low.  And yet production declined significantly.  On average, it declined by 5% a year. 

 

 

This table shows how much production declined each year from 1988 to 2006 under very low taxes.  It provides ample evidence that low taxes will not necessarily spur increased production.  SB 21 will cost Alaskans billions without any guarantee of more oil in the pipeline.  It is ill-conceived and should be repealed.

 

Year	AK oil production in million of barrels	% decline by year
1988	759	0
1989	704	-7
1990	666	-5
1991	680	2
1992	654	-4
1993	605	-8
1994	595	-2
1995	571	-4
1996	544	-5
1997	508	-7
1998	463	-9
1999	416	-10
2000	388	-7
2001	382	-2
2002	388	2
2003	383	-1
2004	360	-6
2005	342	-5

 

   

Welcome to It's Our Oil - A Place To Share Your Views About Why Parnell's Oil Wealth Giveaway Should Be Repealed

Hello!  This is Senator Bill Wielechowski.  I have set up this new site to provide a place to share my reasons Senate Bill 21, Parnell's Oil Wealth Giveaway, should be repealed by the voters one year from today.  I will also be sharing reasons submitted by fellow Alaskans.

 

As you know, a group of dedicated Alaskans collected nearly 52,000 signatures to put this question on the ballot.  Only 30,169 signatures were required, but this group collected far more than was necessary.  Many Alaskans were eager to  sign the petition and ensure all Alaskans can vote on this critical issue.

 

There is no question that oil taxation is a complex issue.  That is why it's so important to present facts for Alaskans to sort through and weigh.  Certainly the oil industry will be presenting its perspective through a glitzy and expensive ad campaign.  This site is a place average Alaskans concerned about The Giveaway can present their views and learn about my reasons this misguided and ill-conceived bill must be repealed.

 

If you would like to submit a reason, please send it to repealSB21now@gmail.com.  Please provide as much factual back-up for your reason as possible and share the source of your facts, so other readers can follow-up, verify and learn more.

 

I believe Senate Bill 21 was one of the worst bills ever passed by the Alaska Legislature.  I hope this site will help you understand why and prepare you to vote one way or another on August 19, 2014.