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  It is ill-conceived and should be repealed.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