Comment Letter:
Support of HB110 - Timothy Breeden

Please support for HB110, here is why I support it:

A few elected officials have been parading the idea that "the state has not done a good enough job marketing the state's current tax incentives" that is an incredibly dubious assumption. I find it hard to believe that these extremely sophisticated companies with a bunch of hired CPAs and attorneys do not know what incentives the state is offering.  While I appreciate that these officials take this matter seriously, we need to look at this long term. There is no denying that lower tax rates could reduce revenue flowing into state coffers in the short term, but it is clear Alaska is competing in a global market and in the long term this reduction will make the state a more desirable place to invest, which ultimately will lead to higher revenues. The best indicator of the future is to look at the trends from the recent past. Our state’s oil production has been steadily declining over the past 20+ years or so, masked by high oil prices. If Alaska was competitive, we wouldn’t see such a downward trend. Since 2003, the decline in production in Texas has been virtually arrested, demonstrating that mature energy regions with the right fiscal terms can mitigate decline.  Alaska needs 2 to 3 fields like Eni’s Nikaitchuq each year to help stem the decline. Decreasing taxes will help encourage more exploration so more projects like Nikaitchuq are in Alaska’s future. Billions of barrels of oil remain on the North Slope and offshore in the Arctic, but the resources are challenging and expensive to develop.  We need to be competitive, and we needed to do it yesterday. The current production tax is a disincentive to invest here, especially when oil prices are high, given the progressive surcharge which captures most of the upside for the state and not the investor who incurred the risk. As a result, Alaska becomes less competitive at high oil prices, and investors have turned indifferent to investing here whether oil is $70 or $120 a barrel.

Alaska cannot tax its way into prosperity. To sustain its economy, Alaska needs to encourage new investment to get more oil in the pipeline. Lower taxes will lead to increased investment in exploration, which will ultimately result in higher revenues to the state over the long term. Conversely, the more Alaska taxes companies to produce a commodity, the less it will produce here, and the more it will produce elsewhere.

Respectfully,
Timothy Breeden

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