‹ Oil & Gas

Ballot Pressure

August 16, 2014

Alaskans vote on 19-Aug-2014 on the repeal of the Oil and Gas Production Tax and the More Alaska Production Act (MAPA), which grants tax breaks to oil companies.

Alaska does not have a state income tax or statewide sales tax, but it still maintains the lowest tax burden of all 50 states. About 93% of its State budget comes from oil and gas activity. Under the previous tax code, ACES, oil companies paid a base rate of 25 percent on the first $30 of net profits from a barrel of oil, plus a 0.4 percentage point increase in tax rate for each subsequent $1 in profit per barrel. Under current legislation, oil companies pay a base rate of 35 percent, but the additional add-on tax matching the market price of oil is removed.

Under ACES Alaska’s ‘take’ was 71-75% compared to its competitors North Dakota 63%, Texas 60% and Alberta 55%. Under the current tax regime the ‘take’ is approximately 61-65%. From 2013-2014 Alaska’s oil production decline has stopped (a 0.13% decline).

The electorate seems evenly divided on repealing the current law. Alaskans are being bombarded in the media with arguments on both sides. The oil industry and indeed the business community has come down strongly against repealing the current law. Interestingly, native regional corporations have also opposed the repeal of the current law.



Within the last year the production of oil in Alaska has stabilized as oil companies have spent the exploration dollars to find more oil and to increased production from the North Slope. The recent production decline has been erased due to new activity. If Alaskans choose to repeal the current pro-exploration laws there will be quick slowdown and sharp curtailment in economic activity statewide. It’s a golden goose situation. Better hope voters choose not to kill the goose.