Businesses urged to join debate over state oil tax

Posted: Thursday, January 27, 2011

At a Jan. 11 summit for Alaska small businesses and lawmakers, the CEO of Northrim Bank championed two messages: small businesses can and should engage in current events with their local legislators and they should use that connection to champion the repeal or reform of the progressive oil and gas taxation scheme known as ACES.

Not everyone discussed the tax, known as Alaska's Clear and Equitable Share, or ACES; former state Senate President Mike Miller, himself a small business owner, said little about it, as did state Sen. Johnny Ellis, an Anchorage Democrat.

But Marc Langland, chairman and CEO of Northrim Bank, delivered a keynote speech in which he said the tax stifled continued investment in a time of uncertainty within the industry that contributes by far the most to the state's bottom line and economic well-being.

"From the peak of 2 million barrels (of oil) per day in 1988, we are now producing only 640,000 barrels a day," he said before small crowd of nearly 30 small business owners and entrepreneurs.

Production declined 7 percent from 2009 to 2010, Langland said. The state forecasts a 4 percent decline this fiscal year ending June 30, he said.

But even this is a generous forecast, he said, because these numbers are based on the theoretical output of projects that may or may not be undertaken.

Very little of Alaska's land is privately owned, Langland said, meaning the state "dominates the largest single sector of our economy, through land ownership, regulations and taxations."

"To make their investment forecast work, the state projects that industry spending will increase 18 percent over the next two years, which is not what we're hearing from the companies who will actually be doing the investment," he said.

BP's capital spending will not rise beyond 2010, Langland said, and will remain at an amount less than that of 2009. ConocoPhillips did not drill any exploration wells in 2010, Langland said, and they have announced that they will not drill any in 2011, he said.

"These numbers highlight serious flaws with our state government policies," he said.

A gas pipeline to the Lower 48 would not provide the same lift to state revenues the Trans-Alaska pipeline has, Langland said. And with taxation as it is today, companies will have little incentive to continue to find oil deposits, he said.

"Our leaders have lost sight of what it takes to stimulate investment," he said. But he encouraged small business owners to take to the state Legislature and tell them to change the law.

"Don't sit back and let someone else do it," he said. "We need your personal commitment to tell the story of how the health of our economy impacts your business."

Speakers later told the audience all about how to go about making the approach, whether or not they had specific concerns about ACES.

Among bits of advice shared by the speakers: work closely with legislative staff, become knowledgeable regarding the legislative process and don't wait until the session starts to make your approach.

"It's all about relationships," said Ellis, who earlier had quoted Aristotle about politics. "I think Charlie (Huggins) will probably agree that if folks come to Juneau prepared, or approach their legislators here in their home community prepared, knowing what's going on... they are more effective advocates for their position."

Sen. Charlie Huggins, a Wasilla Republican, reiterated a stance that would surely have pleased Langland, supposing he had stayed after the keynote.

"Number one: I didn't vote for ACES. I'll just put that on the record for you," he said.

Ellis reiterated the point that legislators' staffers are there to help constituents, especially when the lawmaker cannot conduct a meeting at the moment but will be available later.

But getting "huffy" with them, Ellis said, is a bad idea.

"They can be your best friend, or they can be your biggest roadblock," Ellis said.

Huggins suggested that a great place to host a meeting might be the owner's place of business, since there the lawmaker can be more accommodating to the business and get to know employees.

"It's your issue, it should be on your terrain," he said.

Miller, current owner of the world-famous Santa Claus House store in North Pole, said legislators mean well but don't have an intrinsic understanding of every issue, which is why it's helpful for constituents to teach them how they can use their legislative abilities to help.

"There are some times that you're gonna have issues that are gonna come up, and you're gonna come to a legislator, and they will wanna help you, but they're not sure how to help you. And you're gonna have to get involved," he said.

Sean Manget can be reached at sean.manget@alaskajournal.com.



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