SB 21 was oversold by proponents who went far beyond saying 'decline rate will decrease'

Last summer, to mark the fifth anniversary of the passage of SB 21, I included this accurate sentence in a column: "Oil production in Alaska is lower now than it was when SB 21 was approved."

Suzanne Downing, grand inquisitor of the Republican Party in Alaska, responded with a column from Sen. John Coghill who said I was wrong and that SB 21 should be judged, not from the anniversary of its passage, but from the anniversary of its effective date, Jan. 1, 2014. (Comparing 2014 to all of 2018 shows that Coghill’s numbers on oil production were inaccurate.)

Downing was wrong then and she is wrong again with a new column saying my comments on SB 21 are such that I am “simply trafficking in falsehoods.”

Alyeska says the trans-Alaska pipeline averaged 513,441 barrels per day in 2014, the first full year that SB 21 was in effect. In 2018, it averaged 509,315 barrels per day. That’s not an increase.

Here is the column from last summer in which I mentioned oil taxes, noting the refusal by the Republican-controlled Senate to enact taxes that would help solve the fiscal problems in Alaska. Before he quit the Senate to run for governor, Mike Dunleavy was part of that group.

The state budget plan from Parnell, based on the hope that oil prices would stay near $100, said that state savings should now be about $22 billion, which is about $20 billion higher than they are.

Here is the recent column in which I said that SB 21 was oversold as the miracle cure for Alaska oil production, an idea on which Downing dumps.

Alaska deserves a thorough discussion about SB 21 and Downing has given me the motivation to pursue it in the weeks ahead. The former Parnell speechwriter mischaracterized what I wrote, which is no surprise.

The column was accurate—SB 21 was oversold by the Parnell administration.

The new argument from Downing, which echoes what economist Ed King of the Dunleavy administration has said before, is that North Slope oil production is increasing even when it is decreasing.

It is "increasing" because new oil discoveries have reduced the rate of decline. So oil is down, but it’s up, their version of a Jedi mind trick.

In the buildup to what was branded as the More Alaska Production Act, no one called it the Reduced Rate of Decline Alaska Production Act.

On his website, King repeated the fallacy that the only options to consider about this are SB 21, as it exists, and ACES, the previous law.

But that analysis is incomplete. For one thing, the Legislature refused to increase the minimum oil tax to better protect the state in the event of a prolonged crash in oil prices, the sort of oil crash that happened and made the last several years worse for state finances than they should have been.

There are various oil projects on the horizon and oil production may have stabilized, but the 2019 reality is far short of the 2013 vision or the claims made during the 2014 campaign to keep the tax cut from being repealed.

Overselling was also part of the Dunleavy campaign. He said many times that one reason public services would not have to be cut under his budget was that oil production would increase by 100,000 barrels a day in the next two years and increase 300,000 more barrels per day in the five years after that. Increases of that size are not in the state forecast.

Dermot Cole6 Comments