Gambled and lost

Oil companies got nothing but higher production taxes

North Slope oil producers thought they had signed on for an “everyone wins” deal that would benefit the state treasury, Alaska residents and the companies, too. That was the plan.

They agreed months ago in negotiations with the governor to pay much higher oil production taxes. As part of the deal, they believed the Legislature would concur not to change oil taxes for 30 years and would sign off on a fiscal contract with the companies governing taxes and royalties on the proposed North Slope natural gas pipeline for 35 years after operations begin.

It was a good business decision: Pay more in taxes, but lock down a promise from the Legislature not to again raise taxes for a long, long time. Most companies would agree to such a deal, eliminating uncertainty of what the fiscal future might bring. A tax bill in hand is better than a bigger bill lurking in the bushes.

While the companies don’t love the idea of paying higher oil taxes, they figured settling that issue would help them proceed with the huge financial risk of building the gas line. And they figured Alaskans would like that part of the deal, too, with visions of construction jobs and billions of dollars of natural gas taxes and royalties.

Anchorage Daily News