A multitude of proposals have been suggested, including raising taxes on the oil and gas industry. While the temptation may be strong to try to raise more money from the energy industry, even in conservative states, trying to plug the budget hole by taxing petroleum producers will inevitably backfire by reducing Alaska’s energy production.
But what is fair? Previous proposals would make North Slope producers pay more in taxes on each barrel of oil produced and subject privately owned oil producers to Alaska’s steep corporate income taxes. The high costs of pumping oil from the permafrost combined with high transportation tariffs significantly raise the investment risks for companies brave enough to even attempt drilling in the Arctic Circle. Levying new severance taxes on the industry risks making Alaska’s business climate as hostile as its natural one at a time when new investment into oil extraction is desperately needed to revitalize production.
With many financial and development challenges facing Alaska’s few remaining oil producers, the last thing they need is to be treated as the state’s rainy-day fund. As Gov. Mike Dunleavy has rightfully said, “Alaska has the resources, creativity and ability to achieve energy independence that will fuel a growing economy.”