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.
Joe Arness: The State has become (via ACES) too aggressive in their oil tax structure. Any sort of economic activity will be evaluated by the person making the investment and taking the risk based upon a potential return. When the State is taking as large a “slice of the pie” as they are, I don’t believe it makes economic sense for companies to invest. Further, and even more egregious is that the State was willing to step in after the investments were made and change those tax rates to a point that they seem punitive. That is simply wrong...if the State can do that to the oil industry, what stands in the way of them exercising the same option in other industries?
Cathy Giessel: There is a problem with the State’s current oil tax structure called ACES. Several consultants were hired during the 2012 Legislative session who all stated the same thing…” Alaska’s tax structure makes Alaska not competitive on the worldwide market.” We are between Turkmenistan and Angola, with our 78% total government take for a new oil field, when oil is priced at $100/barrel. We are above Venezuela in government take for an existing well at $100/barrel. The days of “easy oil” are gone. Our high costs to explore and produce, along with our high “government take” (taxes) make new or unconventional oil too expensive to produce, especially any new fields.
Many tax options exist for spurring new oil development that will fill the oil pipeline. Some options: lowering government take (tax), change back to gross tax, give royalty relief. The most important result to achieve is more oil flowing through the pipeline.
2. What role should the Legislature play in ensuring the future energy security of Alaska?
Arness: Clearly, some portion of our current income stream should be dedicated to energy security. That would include both renewable and non-renewable sources. Simply giving lip service to such planning will leave us wanting as time goes by...there needs to be a funded, thoughtful program whose purpose is to review and encourage alternatives.
Giessel: Rising energy costs affect businesses and citizens. The Legislature must act to facilitate an in-state natural gas pipeline, bringing that fuel to as many Alaskans as possible. The Legislature has begun this process through two different pipeline projects. The first was a large diameter pipeline through Canada to the Lower 48, called Alaska Gasline Inducement Act (AGIA). Significant natural gas production in the Lower 48 has made that project less likely to proceed.
The Legislature established the Alaska Gasline Development Corporation (AGDC) to pursue a smaller diameter, in-state gasline to supply Alaskans and to allow for exported gas. The Alaska Stand Alone Gas Pipeline (ASAP) was told to find the most economic way to bring gas to Alaskans and to tidewater, either in Prince William Sound or Cook Inlet. AGDC has been making great progress on the ASAP. The State is considering several possibilities for partnering on the project.
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?
Arness: I would oppose the legislature imposing their collective wisdom on local school districts and do not believe that using funding as a mechanism to influence local decisions is appropriate. Therefore, I would advocate for any change to funding to be channeled through the funding formula. That being said, I would like to see a change to the mechanism that is the funding formula. In my experience, the amount of funding is based on nothing more than “how much money we have.” It should be based upon some tangible indicator which would allow districts to plan and appropriately respond to changes brought about by State actions.
Giessel: Education is first, last, and always about children. It is just common sense that that we focus on results rather than dollars. I want to look at how and where we spend education dollars. Parents want education programs that succeed in giving their child the best education opportunity. Parents and teachers want more dollars put into the classroom and less into the administration.
Many schools are performing very well in achieving results…well-prepared, knowledgeable students. Alaska has many outstanding teachers in our classrooms. I want to support those teachers and schools that are achieving results and building on their success…every child in Alaska has the opportunity for a solid education, if the family and child chose to do their part to work hard and study.
Of course this requires money but I believe we can achieve success within our current budget.
4. How should Alaskans vote on Ballot Measure 2, establishment of a Coastal Management Program? Why?
Arness: Clearly the State needs to have a Coastal Zone Management Program. However, I will be voting against the current proposal (Prop 2). I believe that this is one of the subjects where the State Senate failed miserably. It is a function that the Legislature should have performed to review the possibilities, discuss the options, and then establish a rational program. Simply having someone sit down and write a 15 page program with a simple yes/no vote by the public is not an acceptable way to enact such an important program.
Giessel: I will vote NO on Ballot Measure 2. Public input into projects is fundamental to our American way of life. But BM2 doesn’t provide for good public input. A board is created that has vague powers and is made up of an unbalanced group of appointed people. The board will make the rules and make the decisions for projects affecting over half of Alaska land. On the 13 person board, only 2 members will represent 74% of Alaska’s population (Anchorage, MatSu, Kenai Peninsula, Fairbanks).
Anyone living on rivers emptying into coastal areas will be ruled over by this board, not just people living on the coast. The board will have new powers to regulate “scenic” and “aesthetic” standards. They may rule that blue tarps are not allowed where you live. This is not like the previous program.
Alaskans are tired of government dictating what they can do on their land.
5. What economic challenges does your district in the next 5 years? How do you see yourself addressing those challenges in the Legislature?
Arness: The new Senate District N, as well as the rest of the State of Alaska, faces enormous economic challenges in the next 5 years. I believe that if we (as a State) continue on our current path, we will have not only challenges, but cataclysmic events. The “rebirth” currently taking place in Cook Inlet is an indicator of what could happen throughout the State... but we need to have the will to follow through. In lieu of that, we are faced with a continuing decline in oil production and therefore a disastrous drop in funding for the operations of the State. We spend entirely too much as a State, so some “adjustment” is probably in order ... but, I firmly believe that belt tightening brought about by huge deficits at the State level would negatively impact all of us.
Giessel: The most important economic challenge facing District N in the next 5 years is refilling the TransAlaska Pipeline (TAPS) with oil.
Refilling the TAPS will:
* Continue to provide funding for education, transportation, public safety, fisheries enhancement and more. Today, 93% of our state funds come from taxes on petroleum production on the North Slope.
* Keep our kids (and families) here, by providing jobs. Yes, we have jobs in Cook Inlet and in our ports but we are losing the skilled workforce to other areas of the US, where petroleum resource development is going strong.
* Allow us to develop energy for our own use, by making natural gas and products from oil available to our residents.
Refilling TAPS means a return of opportunities for all Alaskans to live here, have a good paying job, support their family, and have a rewarding career. That’s the future we all want.