Because Alaska has no income or sales tax, the general fund pays for nearly every state service including infrastructure and education; 93 percent of the fund is comprised of oil money.
At its peak, Alaska was producing over 2 million barrels of oil per day, averaging 1.6 million barrels a day that year (1988). Since then, Alaskan oil production has slowly declined and has now fallen behind Texas, North Dakota and Canada in production.
Supporters of SB21 believe revisions to the oil tax in 2007, championed by former Governor Sarah Palin, have caused Alaska to miss out on the current worldwide boom in oil and gas investment. Alaska has the largest oilfields ever discovered in North America, but the oil industry has been restricted to explore by federal regulatory and permitting standards as well as cost. The NY Times quoted Exxon’s Dan Seckers prior to passage of SB21, who said “the current tax structure creates a major disincentive to invest in the high-risk, high-cost opportunities available in Alaska.”
For now, Alaskans can only hope the tax breaks will spark new investment and put Alaska back on the map as a major oil producer. And judging by a U.S. Department of Energy report, the outlook is bright. The report estimates that recoverable oil on the North Slope is around 22 billion barrels, including reserves from existing fields and undiscovered resources.
Additionally, the University of Alaska’s Institute of Social and Economic Research says “The Alaska OCS may be one of the largest untapped oil and gas basins in the world. An annual average of 54,700 new jobs would be created and sustained through the year 2057 by its development, with 68,600 during production and 91,500 at peak employment. Development of Alaska’s OCS resources would result in a total of $145 billion in new payroll through the year 2057, including $63 billion to employees in Alaska and $82 billion to employees in the Lower 48.”