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Olson: Challenge ahead is making Alaska competitive

House District 29

Posted: August 21, 2012 - 9:04am

Editor’s note: The following opinion pieces were requested by the Clarion to offer our readers the viewpoints of those running for office in the Aug. 28 primary election. 

Each candidate also received a questionnaire, the answers to which may be found here.

Today’s focus is on candidates running State House District 29, representing Kenai, Soldotna and Kalifornsky Beach. 

Incumbent Kurt Olson and challenger Gary Knopp will appear on the Republican ballot. No candidates from any other party filed to run for the seat.

Each response is printed as it was received.


The challenge facing Alaska in the next decade will be making Alaska competitive. Our state is dependent on oil for approximately 92 percent of our revenue. We need to become competitive again with shale and conventional oil in Western Canada, the oil producing states such as North Dakota, Wyoming, Texas and the Gulf of Mexico (onshore and off-shore). Most of our efforts have been focused on improving our tax climate – we are have one of the highest oil taxation programs in the world. We cannot control the limited drilling season on the North Slope, the harsh weather conditions, or the distance to markets. On the positive side, we can offer companies developing our assets a stable political regime, friendly neighbors on our borders, and an oil pipeline that has surplus capacity for future new production of about 800,000 barrels per day.

The question that has not been successfully answered during the past Legislature is what is a reasonable level of taxation on North Slope oil? ACES – Alaska’s Clear and Equitable Share did not anticipate oil reaching $140 per barrel. It included a mechanism to increase the percentage of tax as oil prices increased. It did not anticipate prices rising as high and as fast as they did.

This was good news and bad news. The good news was revenue to Alaska increased significantly. The bad news was that the North Slope producers looked for other areas to drill, most notably Alberta and North Dakota. Alberta learned quicker than we have – after increasing their taxes shortly after we did, they saw the negative results sooner and adjusted their program within two years. The only reason we are not running a deficit of billions of dollars is the high price of oil. When it drops to expected levels in the $70-80 range from the current price $110 per barrel we will feel the pain.

We will need a balanced approach that will lessen the increase during periods of high prices per barrel. ACES refers to that as progressivity. We will have to factor in the difference between oil from the legacy fields and new production. 

The challenge will be in keeping it competitive with our competitors. If we can do that we should be able to keep our current workforce, hire new workers, produce more oil to put down the TAPS line and generate a revenue stream that will meet our budgetary demands.

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