Back in August 2013, WC cautioned his readers that SB 21 was so badly written that it could result in the State writing oil production tax checks to Big Oil, rather than the other way around. WC wrote:
It’s actually even worse than that. If oil prices were to fall far enough, and oil companies were to take sufficient advantage of Captain Zero’s shoddily drafted investment tax credits, the amount given as credits could exceed the revenue the State receives under SB 21. That’s right. The State could end up writing checks to Big Oil, rather than the other way around. Admittedly, that’s unlikely: the same factors that would result in lower oil prices should lead to lower levels of oil exploration. You know, supply and demand. But as an example of absolutely shoddy draftsmanship, it’s hard to imagine anything worse.
Those chickens have come home to roost. Governor Walker has an opinion piece in the Anchorage Daily Dispatch, and Dermot Cole has written a good analysis of the crisis. It’s nice that folks are noticing a problem that was there from the start, but was swept under the rug by Big Oil’s anti-Prop 1 campaign. The little “drafting error” will cost the State about $100 million this year. Assuming no change in the law or in crude oil prices, the check will be in the range of $400 million next year. Those are mighty big chickens coming home to roost.
WC was particularly annoyed listening to State Senator Cathy Geissel (R, Anchorage) on the Alaska Public Radio Network the other night. Well, WC finds Senator Geissel to be consistently annoying; it’s more accurate to say she was more annoying and more dishonest than usual on January 8, when she worked hard to shift the focus from the current disastrous situation to how SB 21 was better about production tax credits than the former ACES tax structure. As a piece of political misdirection, it was mediocre at best; but it was a breathtaking example of dishonesty. ACES floored the production level at a much higher level. Crude oil prices would have had to fall into the teens for the current situation to obtain under the old law.
Senator Geissel will likely be chair of the Senate Resources Committee again. Any bill to reform SB 21’s egregious deficiencies will likely have to go through her committee. The omens for such a reformation, shall be we say, are inauspicious.
This isn’t the first time Parnell’s chickens have come home to roost; as we speak, Governor Walker is axing most of Captain Zero’s boondoggles. There are more to be found. It is, after all, quite a legacy. But SB 21 may turn out to be the worst.