SB 21’s defense is seriously misleading | Community perspectives

But that’s not the story revealed by the Department of Revenue’s (DOR) Spring 2024 forecast. Over the ten-year period covered by the forecast, expected production levels increase by more than 35%, from 468 thousand barrels per day (mbd) at the start to 640 mbd at the end. But the oil royalties available to pay for unlimited general expenses do not; instead, they remain largely static, rising only 1% over the same period.

More to the point – and completely omitted from their commentary – is the fact that, despite the significant increase in production levels, projected revenues from SB 21 production taxes will decline dramatically over the period, falling by 30%, from $940 million at the beginning. to just $658 million by the end. As a result, total unrestricted oil revenues also decline over the period, from $2.43 billion at the beginning to $2.27 at the end.

The co-chairs are probably right when they say that oil companies and the contractors that serve them will do well over the period. But they are wrong to suggest that this extrapolates to the broader economy and all Alaska families.

Instead, one or both of two things are likely to happen to fill the gap left by declining oil revenues: the Legislature will reduce inflation-adjusted spending levels, or it will implement revenue substitutes that will take responsibility for share of expenditure that was previously covered will largely shift. by oil to Alaska families, either through continued and ever-deepening PFD cuts or through some form of individual taxation.

In short, Alaska’s overall economy and most Alaska families will end up paying more – possibly a lot more – to compensate the oil companies that pay less. In other words, many Alaska families will earn less to subsidize the oil companies and their contractors who earn more.

While that is understandably an acceptable trade-off for the oil companies and their contractors, it should not be the case for the vast rest of Alaska’s businesses and families.

To be clear, we also supported SB 21 at the time it passed and publicly opposed the 2014 referendum to repeal it for the very same reasons the co-chairs claim to encourage: creating a supportive environment for additional investment in and production from the state’s oil resources.

But we are now honest enough to recognize and admit that ten years after its passage, SB 21 has some significant design flaws that must be addressed to remain a fair way to distribute the state’s oil revenues between industry on the one hand and Alaska. families on the other side.

We are not discussing or supporting the repeal of SB 21. So far it has done a lot of good for Alaska families.

But as we have discussed elsewhere, we do support making the changes necessary to ensure that both current and future Alaska families can appropriately share the benefits of increased production. We hope that many of those elected this cycle – and perhaps even the co-chairs – will eventually do so.