Debate about Alaska's oil and gas revenues has been too much about short-term gain and not enough about long-term interests. The result is a system that fails to optimize outcomes for either the state or industry. Alaska can do better – we can have a system that reduces development risk, increases production and jobs, gives Alaska a fair share for our oil, enforces budget discipline in Juneau, strengthens the Permanent Fund, and takes the politics out of the state's relationship with the oil industry. Doing better, however, requires a new approach.

Alaska receives oil revenue from two main sources - royalty (generally, the state's 12.5% share from an oil field) and severance (the selling price for the oil "severed" from the state). Historically, debate has focused only on severance.

When the old severance method, ELF (Economic Limit Factor), faltered, Frank Murkowski replaced it with PPT (Production Profit Tax), followed quickly by Sarah Palin's ACES (Alaska's Clear and Equitable Share). Both PPT and ACES are essentially corporate income taxes, built around "net profits," and both captured revenue for the state during this recent time of high oil prices. But long-term, revenue depends on production as well as price, and we need a system that does a better job encouraging production.

That's why it's worth examining a "no severance, royalty-only" solution: Eliminate ACES entirely and replace it with a field-by-field royalty structure.

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Mailing address:

P.O. Box 91365
Anchorage, Alaska 99509

Telephone:

56-ETHAN (563-8426)

Email:

info@ethanberkowitz.com

I’m running for Governor because the Alaska I know and love can be and should be much more. Alaska, more than any other place on the planet, has the resources – both physical and human – to face the future on our own terms: self-reliant, independent, and with justifiable optimism about our opportunities.

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