1. Are there problems with the state’s current oil tax structure? If so, what is the best approach to fix them? If not, please explain how and why the status quo is working.
Gary Knopp: It depends on who you ask. In my 33 years in Alaska and my 20 years working in the oil & gas industry, lobbying efforts for changes in taxation have been continuous. It was originally the ELF system and now ACES. I don’t expect industry will ever be content and the lobbying efforts for tax reform will always be an issue. In defense of the industry, Alaska has a current budget of 12 billion dollars of which 92 percent is funded by taxes on the Oil & Gas industry. Cost of doing business (outside of taxes) increases exponentially every year. If high tax rates are truly a barrier to the industry’s ability to explore, develop and produce then they need to be adjusted. I expect the true and appropriate tax rate is somewhere in the middle.
Kurt Olson: There are significant problems with Alaska’s current oil tax structure. ACES – Alaska’s Clear and Equitable Share has stifled new oil development on the North Slope. As a result, we are seeing the major companies channel their efforts to regions with more reasonable tax structures, lower costs, and longer drilling seasons such as Alberta, North Dakota and the Gulf of Mexico region. The only thing keeping Alaska afloat is the high price of oil. The Trans-Alaska Pipeline is currently operating at one-third of its peak volume. When the price drops below $108 per barrel we will be forced to balance our budget from reserves, or reduce services and spending. We need to strike a balance with a competitive tax program that encourages new production but at the same time gives Alaska a reasonable share. The progressivity factors will have to be adjusted or capped.
2. What role should the Legislature play in ensuring the future energy security of Alaska?
Knopp: Our legislative bodies should embrace, advocate and support any reasonable efforts to get our natural resources to market. They should immediately endorse and support the proposed in state gas line to tidewater with branch legs to communities along the route. This first and foremost provides energy security to the majority of the citizens of the state. Taking it to tidewater opens up the possibilities of producing LNG and shipping them to the remote corners of the state and southeast Alaska to benefit the residents of these areas. Legislators should accept the fact that this line will require subsidies and should be prepared to do so. They should also support the continued exploration and development of renewable sources of energy ( wind, solar, geo-thermal, tidal, etc). These efforts should be made by energy companies with the support of the legislature and not be undertaken by state agencies.
Olson: The Alaska Legislature must be proactive rather than reactive on both energy security and the development of our assets for in-state utilization. A major step was taken with the completion the Cook Inlet Natural Gas Storage Alaska (CINGSA) facility to store natural gas for use during the winter months.
Our natural gas on the North Slope needs to be brought down to the Cook Inlet with several off-takes for delivery in the Interior and Bush Alaska. We need to proceed with the development of alternative sources such as hydro, geothermal, tidal and wind resources.
In 2010 two bills formed a template – HB306 and SB220 to direct the use of renewable sources and establish a revolving loan fund to assist in funding energy related projects. We need to make sure that our efforts are shared by as much of Alaska as possible.
3. Last session, there was a debate on whether to address rising costs to school districts with an increase in the funding formula, or through appropriations to address specific needs. Where do you stand on this issue?
Knopp: This issue is a tough issue for the state as well as the school districts. Like everything the cost of education is constantly climbing. School districts have a hard time every year not knowing just how much funding they will have depending on local contributions. They have higher cost associated with recruitment of teachers, negotiated salary increases, health care, transportation etc. The state just went through a series of funding increases in the base student allocation. I think that at this time I would support specific needs appropriations but would not support another increase in the funding formula.
Olson: Funding education is one of the most difficult tasks facing the Legislature. I believe that the 28th Legislature will address the majority of the increases in funding by specific appropriation rather than significant changes to the funding formula. That gives the Legislature the ability to address the differences in costs based on size of the districts, energy, and transportation. The Kenai Peninsula Borough has one of the best school districts in Alaska but there are a number of districts that do not operate as efficiently and with the same fiscal restraint as ours.
We need to resolve the issue of unfunded or partially funded Federal mandates such as No Child Left Behind. States are left to pick up the costs of a one size fits all mentality in Washington. The real losers are the children who are taught how to take tests rather than receive an education.
4. How should Alaskans vote on Ballot Measure 2, establishment of a Coastal Management Program? Why?
Knopp: I will be voting No on 2. It is my hope that the proposition is soundly defeated. There is nothing good about the coastal zone management program especially as it is written, or what is not written, depending on how you look at it. It creates an opportunity for extreme environmental groups to severely hinder and or stop almost any project. It creates a level of bureaucracy and expense that is unimaginable. More importantly, if this is such a good thing, why should it be limited to coastal communities? What about non coastal communities? Any project of any size already provides the opportunity for public input from the agencies that already exist and have oversight of such projects such as DEC, EPA, Core of Engineers, etc. The mandates for storm water pollution plans, environmental assessment studies, environmental impact studies and others already exist.
Olson: Alaskans should vote no on Ballot Measure 2 - Establishment of an Alaska Coastal Management Program. This measure does not extend the coastal zone management program that died a year ago. It is a major restructuring of the old program with the structure to be developed after the initiative becomes law. We do not know the impact on future development on coastal communities and in the interior along rivers and lakes. Without proposed regulations prior to the vote, we have no idea of the impact of the program. It is not a simple extension of the old program.
Although 38 Juneau jobs were lost when the old program was terminated, 35 of those employees were transferred to other agencies performing similar work. The Legislature was split, the House wanted a simple extension of the old plan, the Senate wanted to expand it significantly. Measure 2 will not fix it.
5. What economic challenges does your district in the next 5 years? How do you see yourself addressing those challenges in the Legislature?
Knopp: Our district faces many economic challenges in the upcoming years. Our risk going forward is in the support we receive at the state level. Other risks include not having a borough administration that has a good relationship with the Governor’s office, the Speaker of the House not being a local representative, oil tax legislation is changed and the state has less revenue to support municipalities, our sport and commercial fishermen are not allowed to fish, tourism declines etc. These issues are always out there, it is important to have strong proactive representatives in Juneau with a plan and the foresight to prepare for these issues before they happen. I see myself in Juneau as already being aware of the issues and having a plan in place to address whatever issue may arise.
Olson: I feel that our district faces the same challenges as the rest of Alaska. We need to encourage the responsible development of our natural resources with environmental safeguards. To accomplish that we will need a tax program that is competitive with those in other states and provinces that are marketing the same resources. We need to set the standards globally for both permitting and environmental protection. A growing economy will produce new jobs and new tax revenue. We need to make sure that development of our resources is both utilized in Alaska and has value added to it in Alaska.
I have an eight year track record, not only bills that I have sponsored, but also bills that I have supported to reach these goals. If I am re-elected, I have the experience and drive to help move Alaska forward.