As we chart our economic future, the contentious issue of raising oil taxes has once again reared its less than attractive head.

Long reliant on income from our petroleum resources to fund government, Alaska now stands at an important crossroads. The majority of revenue necessary to run state government now comes from investment earnings rather than from oil royalties. With a potential federal investment in a long-discussed natural gas pipeline and an evolving energy landscape, maintaining a competitive tax structure is crucial. While increasing oil and gas taxes might seem expeditious in the short term, such tax hikes are analogous to winning the battle but losing the war.

Alaska competes for oil and gas investment dollars on the global market. Among the list of factors considered by potential investors, stable and predictable tax policy rates near the top. As we saw with the ‘Alaska’s Clear and Equitable Share’ (ACES) tax regime of 2008, and the ‘Petroleum Production Tax’ (PPT) before it, adjusting oil tax policy every time the state anticipates a revenue shortfall only serves to stoke investor fears of uncertainty. This uncertainty discourages new exploration and development.

If we exercise prudent restraint with oil taxation, we can and will secure Alaska’s position as a global energy leader and pave the way to a bright future for all of us.

With the Alaska LNG project, new oil discoveries and a federal administration poised to approve a bonanza of projects diversifying Alaska’s economy and providing significant job creation, this is the absolute worst time to be imperiling essential investment by raising the specter of higher taxes. Alaska is already competing with other states, such as Texas and North Dakota, which offer more favorable tax structures. Alaska needs to send a clear message: We’re open for business, ready to encourage investment in our oil and gas sectors now.

The global economy is still recovering from the disruptions caused by the COVID-19 pandemic and Alaska’s economy is no exception. Energy markets are experiencing more volatility due to disruptions in the Middle East and the war in Ukraine. So, at a time when the energy sector is seeking stability, and with so many other places to invest, why would we risk being passed over because we increase oil taxes and exacerbate uncertainty? The answer is emphatically that we should not.

Alaska should focus on measures that stimulate growth and recovery. By demonstrating its commitment to energy development with consistent tax policy, rather than dissuading it with uncertainty, we can ensure a steady flow of jobs, investment, and revenue in the long term. This approach does not just benefit industry but provides for state-funded programs and supports the broader economy, including small businesses, and local communities.

One of the most promising opportunities on the horizon is the possibility of federal investment in a natural gas pipeline. The Alaska LNG Project, a longstanding initiative, aims to transport natural gas from the North Slope to global markets. This project not only holds the potential to diversify Alaska’s economy but also promises significant job creation and long-term economic benefits. The federal government has shown keen interest in supporting this project as it aligns with national energy and climate goals. Notable developments include the U.S. Department of Energy’s endorsement of the project’s potential economic and environmental benefits and ongoing dialogue with energy stakeholders.

The Alaska LNG Project is also strategically aligned with federal objectives of enhancing domestic energy security and expanding U.S. energy exports. By maintaining a supportive business environment, Alaska positions itself as a strong candidate for such investment. A gas line would unlock untapped resources, provide a steady stream of revenue, and cement Alaska’s role as a key player in the global energy market.

Alaska stands at a pivotal moment. The decisions our state government makes today will determine Alaska’s economic future for decades to come. By resisting the urge to raise oil taxes and instead embracing the Alaska LNG project and other opportunities on the horizon with consistent tax policy, Alaska will position itself as a leader in the energy sector. This is a time for vision. By fostering a stable and competitive tax environment, Alaska attracts investment, creates jobs, and ensures a prosperous economy for generations to come.

Increasing oil taxes at this critical juncture will jeopardize this opportunity. Let’s reject short-term thinking and seize the opportunities ahead. If we exercise prudent restraint with oil taxation, we can and will secure Alaska’s position as a global energy leader and pave the way to a bright future for all of us.

The views expressed here are those of the author.

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