Get the Facts

Get the Facts2020-05-01T04:32:07-08:00
  • Collecting Signatures in Sitka

Get the Facts!

There’s a lot of nonsense being published about the Fair Share Act and the issues that make it critical for our state. We didn’t get into this fight without doing our homework. You can read our summary or find your frequently asked question below.

Why is the Fair Share Act important to me?2020-04-28T06:14:59-08:00

Under SB21 and existing law, our economy is suffering, our unemployment rate is the highest of any state, our essential services (such as education, health care, universities, senior services, the marine highway, rural power cost equalization, and public safety) are being cut, our local property and sales taxes are being increased, our capital budgets (that support Alaskan jobs and infrastructure) have been all but eliminated, our state’s credit ratings have been downgraded, our permanent fund dividends are being cut, and the permanent fund itself is at increasing risk.

What are the main features of the Fair Share Act?2020-03-19T12:05:55-08:00
  • The Fair Share Act only applies to our largest and most profitable legacy fields. It does not apply to new and developing fields that have more challenging economics.

  • It increases Alaskans’ share of production revenues from the largest and most profitable legacy fields by increasing the gross tax rate, eliminating net tax credits, and increasing our percentage share as the price of oil and producers’ profits increase. These changes will increase our share by roughly $1 billion per year.

  • It only permits costs related to our largest and most profitable legacy fields to be deducted for the purpose of calculating the net tax. This will ensure Alaskans’ share from those fields is not reduced through deducting unrelated costs and will help level the playing field between new producers and legacy producers.

  • It permits Alaskans to know the revenues, costs, and profits for each of the three largest and most profitable legacy fields. This will ensure Alaskans have the facts necessary to discuss, establish, and maintain sound oil policies and their fair share.

The Fair Share Act is fair to both producers and Alaskans. It continues the existing tax breaks for new and developing fields while ensuring we collect our fair share from the largest and most profitable legacy fields. It levels the playing field for new companies coming to Alaska and eliminates deductions of unrelated costs from the largest and most profitable legacy fields. It also provides Alaskans the information necessary to know how our producer partners are performing. These oil policies are simply better than existing law.

Why should I support the Fair Share Act?2020-04-07T07:03:21-08:00

Oil on state lands belongs to all Alaskans. Our Constitution requires Alaskans get the “maximum benefit” from the sale of our oil. Today, Alaskans are not getting a fair share of the oil revenues and, in fact, are getting a smaller share from our largest and most profitable legacy fields than ever before. The Fair Share Act is a bill proposed by Alaskans through initiative to amend existing law to restore Alaskans’ fair share from the sale of our oil from those legacy fields.

What is Alaskans’ fair share?2020-04-07T07:03:43-08:00

One-third of the gross revenues from the sale of our oil is a good standard to apply in determining if Alaskans are getting their fair share. Governor Hammond was a key architect of our economic relationship with the oil industry. He stated the original agreement was one-third to the state, one-third to the federal government, and one-third to the producers.

Historically, we have gotten 27 percent of the gross revenues from the sale of our oil. In 2004, when we were getting roughly 27 percent, Governor Hammond said Alaskans were being “shortchanged hundreds of millions of dollars” compared with the one-third “once agreed to be our ‘fair share.’” Before SB21 was passed, when the “ACES” tax was in place, Alaska received about 35 percent of the gross revenues.

Currently, Alaskans are getting less than 20 percent of the gross revenues from the sale of our oil, and the producers are getting almost 50 percent. 

Why aren’t Alaskans getting a fair share now?2020-03-19T12:15:24-08:00

Alaskans are getting less of a share than ever before. For decades, our greatest Republican, Democrat, and Independent leaders have honored our Constitution and applied common sense to ensure Alaskans get a fair share from the sale of our oil.

In 2013, however, the legislature passed SB21. SB21 gives away billions per year in unnecessary tax breaks to the major producers. In fact, just one year after passing SB21, Alaskans received $1.6 billion or 50 percent less in production revenues even though the price of oil and production volumes were the same as the year before SB21 was passed. Since SB21 was passed five years ago, Alaskans’ share of production revenues has been negative in three of those five years.

The two charts below help illustrate the impact of SB21 on our production revenues:

Production Revenues After Credits

This chart illustrates the collapse of our production revenues after SB21 passed. Note the $1.6 billion or 50 percent reduction in production revenues even though the price of oil and production volumes remained the same. Also, note our production revenues have been net negative for three of the past five years.

Production Revenue Per Barrel

This chart illustrates the collapse of our production revenues on a per barrel basis after SB21 passed. It compares periods when the price of oil was roughly the same before and after SB21 passed. Note in 2009, before SB21, the price of oil was $68.34 per barrel, and our share was $12.09 per barrel, while in 2015, after SB21, the price of oil was higher at $72.58 per barrel, and our share was $2.01-roughly one-sixth as much as before SB21.

How are Alaskans doing compared with our producers from the sale of our oil?2020-03-19T12:16:18-08:00

To put the current economic imbalance between Alaskans and our producers in perspective, one need only compare Alaska’s current economic circumstances with ConocoPhillips’ current economic circumstances.

  • In 2018, while Alaska’s production revenues were $3.80 per barrel, ConocoPhillips’ profits were $26 per barrel from the sale of our oil. In fact, ConocoPhillips’ per-barrel profits in Alaska were higher than almost anywhere in the world.

  • In 2016 & 2017, while Alaska’s production revenues were net negative, ConocoPhillips’ profits were $1.8 billion from its Alaskan operations. As another point of reference, during this same period, ConocoPhillips lost $4.6 billion from its Lower-48 operations.

  • In 2018, while Alaska cut permanent fund dividends to Alaskans, ConocoPhillips raised its dividends twice to its shareholders.

  • In 2018, while Alaska spent down its savings and made drastic cuts to the state’s budget and to our permanent fund dividends to make ends meet, ConocoPhillips paid $4.4 billion for stock repurchases and dividends, received Board authorization to repurchase an additional $9 billion of stock in the future, and paid down $4.7 billion in debt (18 months ahead of plan).

  • While Alaska’s credit ratings have been downgraded, ConocoPhillips’ credit ratings from Fitch, Moody’s, and Standard & Poors’ have been upgraded.

From virtually any perspective, there is currently no economic balance between how well Alaska is doing from the sale of our oil compared with how well our producers are doing. Alaskans are getting “shortchanged” more than ever before.

The Fair Share Act will increase our share by roughly $1 billion. This is more than fair to the producers and will permit them to make more profit from the sale of our oil than from almost anywhere else on earth. This will result in Alaskans again getting about 26 percent of the gross revenues. This is still well less than what Alaskans received prior to SB21.

Will the Fair Share Act create jobs for Alaskans?2020-03-19T12:19:27-08:00

Yes. The Fair Share Act will keep an additional $1 billion per year in Alaska. This $1 billion will help save existing jobs put at risk by budget cuts and the consequential negative consequences to our economy, will help create new jobs through funding capital budgets for needed infrastructure, and will help create new jobs by stimulating our economy through funding larger dividends.

To put this in perspective, if the entire $1 billion was devoted to the creation of jobs for Alaskans, it could fund 10,000 jobs at $100,000 per year. This is more than the total number of jobs in the entire oil and gas industry in Alaska.

Will the Fair Share Act help new producers and explorers?2020-03-19T12:22:26-08:00

Yes. We want to attract as many new producers and explorers to Alaska as possible. A more competitive and economically viable North Slope will help Alaska by increasing jobs, investment, and production. As it stands today, only a few major producers, which have been reducing investment and cutting jobs, have disproportionate market power on the North Slope. This makes it more difficult for new producers and explorers to invest and add jobs for Alaskans.

The Fair Share Act only applies to the largest and most profitable legacy fields. It continues to encourage new producers and explorers to invest under the existing incentives. It also reduces the legacy producers’ unfair competitive advantage by no longer permitting them to deduct unrelated development costs for new fields from Alaskans’ share of the major legacy fields.

In practical effect, the Fair Share Act helps new producers and explorers while still permitting our legacy producers to enjoy one of the most favorable tax environments in the world. This helps increase Alaskans’ fair share while creating jobs through new investment and production.

Please explain why the Fair Share Act benefits the right fields.2020-03-19T12:22:55-08:00

Tax incentives should only be provided to fields that need support to produce our oil. Under SB21, massive and unnecessary tax breaks are being provided for harvesting our largest and most profitable legacy fields. The Fair Share Act provides greater incentives for new and developing fields and lesser incentives for our largest and most profitable legacy fields. This provides the right incentives for the right fields.

Please explain why existing law benefits the wrong fields.2020-03-19T12:23:20-08:00

Under SB21, existing law provides unnecessary and massive tax breaks to our largest and most profitable legacy fields. Alaskans are sacrificing their fair share of production revenues from these legacy fields for no reason at all. Alaskans need to be diligent not to simply give away our share of oil revenues.

While Alaskans have been sacrificing their fair share, the producers have been reducing investment and jobs in these legacy fields, increasing their shareholder dividends, reducing their debt, buying back their own stock, and investing in oil projects outside of Alaska. Massive tax breaks for these legacy fields is simply giving away our oil for no benefit to anyone but the producers.

Prudhoe Bay is a good example. Since SB21, the producers have reduced capital investment and cut jobs to reduce operating expenses. The real effect of SB21 was to give away Alaskans’ fair share while the producers in Prudhoe Bay were increasing their profit margins by reducing investment and Alaskan jobs.

The Fair Share Act reduces the massive and unnecessary tax breaks we are giving to the producers for simply harvesting our largest and most profitable legacy fields. The Fair Share Act will keep our share of production revenues from these legacy fields in Alaska so it may be used for the benefit of all Alaskans.

Please explain how loopholes in the existing law will increase our current state deficit and are unfair to Alaskans and to new producers.2020-03-19T12:27:05-08:00

SB21 includes loopholes that decrease Alaskans’ share of production revenue and create an uneven playing field for new producers. These loopholes permit costs from unrelated fields to be deducted from our share of profits from the largest legacy fields. These loopholes are unfair to Alaskans and to new producers.

For example, as ConocoPhillips develops several new fields in the National Petroleum Reserve Alaska (NPR-A), it will be able to deduct its NPR-A costs from Alaskans’ share of production revenues from the Prudhoe Bay field. This makes no sense. Alaskans should not be subsidizing the development of federal lands in which they do not have a royalty interest, and each field must stand on its own to be fair to Alaskans and to new producers.

As the result of these loopholes, Alaska’s production revenues will decrease by an additional $300 million per year for most of the next decade as ConocoPhillips develops NPR-A. Stated differently, unless the Fair Share Act becomes law, our state deficit will increase by an additional $300 million per year simply because of these loopholes in the existing law.

The Fair Share Act will only permit the costs related to each of the major legacy fields to be deducted from our share from those fields. This will be fair to Alaskans and to new producers. This will also prevent our state deficit from increasing by an additional $300 million per year.

Please explain why Alaskans should receive a higher share (or progressive share) of oil revenues when the price of oil or producer profits increase?2020-03-19T12:27:32-08:00

As the resource owner, Alaskans should receive a higher share as the price of oil or producer profits increase. Conversely, as the price of oil or producer profits decrease, Alaskans should receive a smaller share. As a matter of sound policy, this balances Alaskans’ interests with our producers’ interests by providing some relief to the producers during lower-price environments while providing Alaskans some offsetting benefit during higher-price environments.

Under SB21, Alaskans continue to take the risk of a lower-price environment while they lose most of the benefit from a higher-price environment. As a result, an increase to the price of our oil or producer profits does not help our economy nearly as much as it has in the past. This is a substantial reason why our economy is continuing to struggle even though oil prices are above $60 per barrel.

The Fair Share Act will increase our percentage share as the price of oil and producer profits increase.

Why is knowing the revenues, costs, and profits of our producers by field important for Alaskans?2020-03-19T12:28:03-08:00

Alaskans own the oil. As an owner state, Alaskans are in a business partnership with our producers to explore for, develop, and sell our oil. Only one of our producers has an obligation to make public its financial performance in Alaska, and that producer does not break out its performance by field. The existing law simply does not allow us to know how our producer partners are doing in each of our major legacy fields.

Instead of making public the revenues, costs, and profits for the producers for each of the major legacy fields, Alaskans are provided with selective, partial, and often misleading information. To have the very best oil resource policies and to ensure we are recovering the maximum benefit from our oil, it is essential that Alaskans have reliable and accurate information.

The Fair Share Act requires producers to report the revenues, costs, and profits for each of the major legacy fields.

How much does Big Oil pay in royalties? Is Alaska competitive?2020-06-15T12:16:27-08:00

Big Oil gets a screaming good deal on royalties in Alaska. Just compare us to the other oil producing states:

Royalties
Texas 25%
Arkansas 25%
Private Land Owners with major reserves 25% for past few decades
Louisiana 21.9% 23.3% since 2000
Colorado 20%
New Mexico 20%
North Dakota 18.75%
Federal Offshore 16.7%

Montana, Utah & Wyoming 16.67%

Alaska 12.5%

Unlike Chilkoot Charlie’s, Big Oil cheats us and passes the savings on to Big Oil!!

How can I learn more or help? 

You can learn more by checking in from time to time on our webpag eon our Facebook page. We post articles, substantive materials, and comments regularly there.

You can volunteer to help Vote Yes for Alaska’s Fair Share on our volunteer page of our webpage at https://www.alaskasfairshare.com/volunteer or on our Facebook page at https://www.facebook.com/voteyesforalaskasfairshare/.

You can donate to Vote Yes for Alaska’s Fair Share, a nonprofit organization, on our donation page of our webpage at https://www.alaskasfairshare.com/donate.