Alaska Voters Reject $1.1B Oil Tax Ballot Measure

Law360 (November 18, 2020, 2:13 PM EST) -- Alaska voters rejected a ballot measure that would have imposed new taxes on oil production and was estimated to raise $1.1 billion.

Voters rejected Ballot Measure 1 on Nov. 3, blocking an alternative gross minimum tax on oil production in certain areas and a tax on production value. The initiative proposed to change the state's production tax in Alaska's North Slope region on wells that produce more than 40,000 barrels of oil per day in the previous year and had more than 400 million barrels of total cumulative production, according to an analysis from the state lieutenant governor's office.

While the vote tally will not be finalized until counties certify election results on Nov. 25, the Associated Press and local media consider the measure to have failed. As of last week, the vote stood at 57.8% to 42.2% by a margin of approximately 54,000 votes.

Under the initiative, production in the North Slope region would have been subject to the greater of two taxes.

One tax would be on the gross value at the point of oil production, at 10% when Alaskan North Slope oil costs less than an average of $50 per barrel and up to 15% when the oil is $70 per barrel or more, according to a bill summary from the lieutenant governor's office. The tax would have increased by 1% of the gross value at the point of oil production for each $5 increment the per-barrel price increases, not exceeding 15% when oil is $70 per barrel or more, the summary said. In addition, no deductions could reduce the tax below 10% to 15%, depending on whatever the rate would be.

The other tax on production value would have been based on the difference between the production tax value of the oil and $50. The difference between those values would have been multiplied by the volume of oil and then the product of that calculation would be multiplied by 15%, according to the analysis. Cost and lease expenditure deductions would have been allowed for the tax, the summary said.

Both taxes would have been calculated monthly for each "field, unit or nonunitized reservoir," according to the analysis. The initiative would have also eliminated tax credits and incentives that are applied against those two taxes. The initiative would have boosted state revenue by an estimated $1.1 billion.

The outcome is a defeat for proponents of the measure, including the Vote Yes on 1 campaign headed by Robin Brena, an Anchorage attorney. The campaign touted the measure as a fix for Alaska's budget crisis.

Meanwhile, BP, ConocoPhillips, ExxonMobil, which spearheaded the opposition, said that the measure could have eliminated or postponed oil development projects in the state, decreased the amount of jobs and led to less long-term revenue.

The opposition launched several attempts through legal actions to thwart the initiative, and Republican Lt. Gov. Kevin Meyer's office pushed for language that would have either stated that tax filings would be subject to the state's Public Records Act, which largely excludes tax documents, or that the initiative does not specify if exclusions apply. The Alaska Supreme Court rejected those changes in August.

Attorney General Kevin Clarkson said that the measure contained language that was difficult to interpret and raised questions about its implementation and constitutionality.

--Editing by Joyce Laskowski. 

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