A man has travelled across the desert for days and is nearly delirious from thirst. He comes across an old farm pump near a dry gulch. The traveler madly pumps the handle, hoping for water to flow, but all he hears is the creaking and clanking of the dry, rusty, iron plunger.

Dejectedly he looks down and notices a glass jar hiding in the shadow. It’s a half-gallon bottle filled with water. As he rushed to grab the jar he sees a note on its lid - “Dear fellow traveler. Do not drink this water!”

Say what?!!

He reads on: “Though this pump looks dry, there is water in it – all you could ever need. To get it you must pour all this water down the pipe to prime the pump.

The traveler has a choice. Does he satiate his immediate need for water, or does he pour this jar of water down the pipe with the expectation of a long-term supply of water.

Friends, this is the choice confronting Alaska today.

Do we want to focus on the short-term – take as much money as we can get today no matter what? Or the long-term – invest in the future by “priming the pump”?

Of course, I am talking about ACES.

But it is really much bigger than one piece of legislation and the money it has generated. It’s really about what type of future we want for our state. With ACES, Alaska is making a choice about its future. Instead of priming the pump, it has decided that it is better to drink the jar - take as much cash today regardless of the future.

The past five years prove this.

Oil prices have never been higher on a sustained basis. Investment is flowing to basins around the world. Yet in Alaska, production continues to decline and investment in new production lags.

Since 2007, production has grown in other basins like North Dakota and Alberta. Indeed, Texas production has grown by nearly 90% or 900,000 barrels per day over the past five years. In the same period North Slope oil production has declined over 200,000 barrels per day.

The pipeline is now three-quarters empty. There is not much to be optimistic about if we don’t change that trend.

To change it we need investment – investment in new production including from legacy fields.

Why is production enhancing investment growing elsewhere and not in Alaska?

Because policy decisions drive behavior.

What is the first thing a government does when it wants you to do something different? It makes policies and passes laws.

Between 2005 - 2010 there was a 5% decrease in smoking in the US. Why? Government policy at the federal, state and municipal levels. By making it harder to smoke, less people are smoking.

And when the fiscal crisis hit, how did the federal government try to stimulate the economy? It gave us a payroll tax holiday. The thought was if we had more money in our pockets, we would spend more and get the economy going.

Without debating whether it was right or wrong, Congress was trying to “prime the pump.” It thought less money in the federal treasury would stimulate the economy and ultimately bring more money in. There were no guarantees, but politicians from both sides of the aisle believed this policy would work.

The bottom line is government makes choices every day and those policy choices drive behaviors.

ACES is no exception.

Alaska’s tax policy does not support long-term investments.

This should not be a big surprise. In fact, during testimony before the legislature last year, the legislature’s own experts recognized the short-term nature of Alaska’s policy.

Pedro Van Meurs said that ACES does not attract investment. And PFC Energy said that ACES encourages harvest, not growth.

Both of these experts recognized that Alaska has a short-term policy.

It does not have to be this way.

In discussing Alaska’s fiscal future, Scott Goldsmith put it like this:
“Looking out 20 years forces us to confront the fiscal reality that the state continues to depend on non-renewable resource revenues to fund government and to support the state economy.”

The policy choices we make today will define our future. By default, we seem to be choosing cash today over a long-term economy supported by non-renewable resource revenues.

Alaska is confronted with a choice about what type of future it wants.

The time is now to talk with your friends, neighbors and legislators about what we want Alaska to look like 20 years from now. I firmly believe that if we have a common vision for the future, it will become much easier to decide on what we need to do to taxes to deliver that future.

Our first decision is whether we want our future in a jar or in a pump.

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