October 26, 2020
Monday AM

The October 14 ADN op-ed by Kim Reitmeier claiming the oil tax initiative would cost jobs, and the economic analysis by the American Action Forum (AAF) on which he relies, are fatally flawed. The two academic papers at the heart of the projection are based on Texas and Lower-48 oil field data. The academic conclusions are mis-applied to Alaska. 

The AAF analysis argues that an increase in severance taxes reduces investment in drilling, and reductions in drilling mean lost jobs and revenue. But if you read the cited article by Anderson, Kellogg and Salant (click here) , you will discover that they explicitly find that increases in severance taxes do NOT decrease production from existing fields, they only change the investment calculus drilling for new fields. And of course the severance tax changes proposed in Ballot Measure 1 only apply to Prudhoe, Kuparuk River and Colville River Units, not to the newer prospects. So while it might marginally affect enhanced recovery investments in the big fields that are inexorably declining, it will not affect drilling activity on the rest of the slope.  

The AAF goes on to reference economic multipliers for oil industry investment. They report $100 million in investment generates about 1,000 direct and indirect jobs. But the economic multipliers for Alaska state services are higher: $100 million generates about 1,260 jobs. So taxing the oil industry to mitigate cuts to the state budget will increase statewide employment, not decrease it. 

And the difference is much greater, since there is no evidence to suggest that leaving the $100 million in foregone severance taxes in the pockets of the oil companies will increase their investments in Alaska. They are more likely to sink it into stock buybacks for their shareholders, which is exactly what ConocoPhillips is doing right now: they announced $1 billion worth of stock buybacks for the current quarter. 

The analysis by the AAF is shoddy hack work by a DC think tank with a political agenda. There are a number of in-state economists who would have done a much more professional job, had they been asked. 

Not only is the industry slogan “Save Jobs” a lie, but so is their slogan “Save the PFD.” The PFD has nothing to do with oil taxes or production: it is based on a legislative appropriation from the earnings reserve account, which represents investment earnings on the Permanent Fund, currently valued at $66 billion: see my ADN op-ed of September 29.

The oil industry is spending $18.5 million on this campaign of lies to Alaskan voters. Let’s be honest with each other: we deserve better!

Sharman Haley, PhD
Anchorage, Alaska

About: Professor of Economics and Public Policy (retired)
Institute of Social and Economic Research
University of Alaska Anchorage

Editor's Note:

The text of this letter was NOT edited by the SitNews Editor.

Received October 16, 2020 - Published October 26, 2020

Related Viewpoint:

SitNews ©2020
Stories In The News
Ketchikan, Alaska

Articles & photographs that appear in SitNews are considered protected by copyright and may not be reprinted without written permission from and payment of any required fees to the proper sources. E-mail your news & photos to editor@sitnews.us Photographers choosing to submit photographs for publication to SitNews are in doing so granting their permission for publication and for archiving. SitNews does not sell photographs. All requests for purchasing a photograph will be emailed to the photographer.