Oil Tax Good for Alaska -- Big Oil Hardly Notices

As we wonder if our State Senate can muster the courage to impose a paltry 2-cent-per-barrel tax on oil pipelines (that's a 0.2% tax), let's look toward Alaska for some guidance. The oil industry flourishes there. Without any other information, my younger Republican incarnation would have assumed that Alaska must go easy on the oil industry and avoid burdening them with big taxes.

Ha. A friend in Britton directed me to this article from the Anchorage Daily News which notes that Alaska lawmakers just upped the taxes on oil production. All that money the Alaska state government has for services and checks for its citizens (think economic stimulus package every year) comes from Alaska's "Clear and Equitable Share" (such a nice name for a tax). Last year Alaska raised the base tax rate on oil production from 22.5% to 25%.

Check your decimal points again: Alaska's production tax: 25%. Our proposed pipeline tax: 0.2%, less than 1/100th the former rate.

The question of whether that Alaskan tax increase will kill the industry seems silly when we consider that Big Oil has labored along just fine and has begged for the chance to drill more oil in Alaska even under a 22.5% tax regime. But, for the sake of academic curioisty, let's look at the impact of that increase. According to the Anchorage Daily News,

• --Additional revenue collected by Alaska through the tax increase in Q4 2007: $234 million
• --Projected increase in annual revenue for the state of Alaska: $1.5 billion (more money than the entire SD state general fund)
• --Exxon Mobil profits (not revenue, but profits) in Q4 2007: $11.7 billion.
• --ConocoPhillips Q4 2007 profits on Alaska exploration and production: $448 million
• --ConocoPhillips drop in profits compared to Q4 2006: 5% (down from $470 million)
• --ConocoPhillips Alaska profit in 2007: $2.26 billion
• --ConocoPhillips decline in Alaska profit compared to 2006: $0.09 billion (down from $2.35 billion)
• [all figures from Eric Lidji, "ConocoPhillips Quarterly Profits up 37 Percent," Anchorage Daily News, 2008.02.02]
  

And in the face of this tax increase by Alaska, in the face of this drop in profits, ConocoPhillips is still willing to agree to cover half the $26 billion dollar cost of building the Keystone pipeline. (Oh, cool: the same article notes that TransCanada's Q4 2007 net income jumped 40%, to $377 million: see Lauren Krugel, "TransCanada's Dividend Raised Amid Profit Jump," Toronto Star, 2008.01.29].

Again, worried our two-cent-per-barrel pipeline tax might crush Big Oil and stop the Keystone pipeline? Worry no more. The corporations we're getting in bed make more money in one year than our whole state. They light their cigars with bigger bills than SB 190 will take out of their pockets.

Let's follow Alaska's lead and require Big Oil pay us our "Clear and Equitable Share" for the privilege of using (and imperiling) our natural resources for their profit.