Aug 18, 2014

Alaska SB21: Should Alaskans be in a hurry to pump up every drop of oil at a lower revenue per drop?

Alaskans have a referendum voting on August 19th on whether or not to repeal SB21.

The interesting point is that both sides are saying the same thing:

Repeal SB21 to get more dividends.
"If SB21 were applied to the entire period of ACES, the people of Alaska would have lost about $8 billion in revenue. SB21, over time, gives away too much and will not pay for itself." (From here)
Accept SB21 to get more dividends.
The key feature of the legislation is the balance that has been restored to our tax system. At today's prices and conditions, we are actually realizing more revenue for Alaskans. (From here)
A big percentage of oil revenue goes into the Alaska Permanent Fund, whose investment return is distributed as a citizen dividend to all Alaskans every year.

It's a tough decision for the citizen owners in Alaska. A very simplified analogy will be the options facing a landlord.

Do you ask for high rents (repeal SB21)?

Do you lower rents in the hope that there will be more tenants (accept SB21)? The rent cut is about one-third.
Vote Yes says Alaska does not share in higher prices under SB 21. False. If prices were to increase to $150 per barrel, Alaska would get 54 percent of the increase. The other 46 percent is shared between the producers and federal government. Under ACES the state would get 86 percent of the increase. (From here)
Unlike empty apartments that cost money to maintain and depreciate in value over time, unexplored oil fields may appreciate in value over time. Should Alaskans be in a hurry to pump up every drop of oil at a lower revenue per drop?

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