Ballot Proposition 1 fails: Alaskans will watch for more barrels from SB21.

Author:Bradner, Mike
Position:OIL & GAS

The feisty campaign over repealing the oil tax reform bill passed by the Legislature in 2013 took up much of the summer for Alaskans. It seemed a new state flower had appeared--the clusters of red "Vote No" and "Vote Yes" campaign signs that were spread along roadways and through neighborhoods.

Narrow Margin

In Ballot Proposition 1, which appeared on the August 19 primary election ballot, a "yes" vote would have repealed the new oil production tax, Senate Bill 21 (SB21), while a "no" vote would retain it.

As it happened "no" prevailed, to the relief of North Slope oil producers and the state's oil and gas support industry, although the margin was narrow, about 52 percent to 48 percent. Many businesses with no direct link to the industry, such as Northrim Bank, actively worked for "vote no" through grassroots organizations like "Keep Alaska Competitive."

Their concern was that a healthy oil industry is important to the state economy.

The primary election vote is likely to encourage oil producers to continue to increase activity on the North Slope as well as sustain an increase in oil production, at least compared with the continuing decline that had been forecast.

The regional breakdown of the voting was interesting. "Yes" prevailed in Fairbanks, Southeast Alaska, some coastal communities like Kodiak, and the southern Kenai Peninsula and Homer area. "No" was strongest in Anchorage, Mat-Su, and the Kenai-Soldotna region and, surprisingly, some rural communities where Alaska Native corporations were campaigning against the repeal.

Although "no" won the campaign, the surprise was that the margin was as narrow as it was considering the sums spent on the campaign by opponents of the repeal.

Oil producers, oil and gas service companies, and several other businesses spent heavily to fight the referendum, up to about $15 million. Meanwhile, the "yes" campaign was thinly-financed and seemed pretty much a grassroots operation.

Despite the heavy funding on "no," there is obviously a large number of Alaskans who remain skeptical and wary of the tax change. Democrats were overwhelmingly "yes," which might be expected, but the vote showed that Republicans were not solid in the "no" camp, either.

Ramped Up Activity

To their credit, oil producers on the slope have ramped up activity in the year and a half since the tax passed. In May, 2013, a month after the Legislature's action, ConocoPhillips announced it was adding a new "workover" rig in the Kuparuk River field, which the company operates. Two months later BP announced it was stepping up activity in the Prudhoe Bay field, where it is operator, and was starting work on a major new development project in the west end of the...

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