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Op-Ed: Proposed Tax Threatens Alaska’s Energy Economy

By Timothy Lee

Recent economic challenges including Biden administration mismanagement, inflation, COVID-19 repercussions and oil price whiplash have left Alaska’s economy in an increasingly precarious state.

That economic instability has in turn prompted a reassessment of the state’s budgetary course.

Alarmingly, the options under consideration amid that reassessment include significant cuts to the Permanent Fund dividend and new tax increases.

Specifically, one proposal would impose a shocking 40% tax on oil and gas production in the state. Recalling the economic principle that the more you tax something the less you get of it, that move would bring devastating consequences for Alaska’s energy industry, leading to job losses, business closures, and reduced revenue for the state.

The ramifications of that proposed energy tax hike would also extend beyond the state. Not only would it risk crippling Alaska’s energy sector, but it would also unfairly target small and medium-sized businesses – the very backbone of the state economy. At a moment when the economy already faces difficult challenges, a tax hike on energy production would only exacerbate those difficulties and drive business and investment to other states and foreign countries.

Significantly, the contemplated energy tax would also weaken U.S. energy independence, which Biden administration policies are already doing enough to undermine.

Adding insult to injury, proponents of the proposed tax betray their thinly camouflaged disdain for the will of Alaska voters who just three years ago overwhelmingly rejected Ballot Measure 1, a similar plan to raise taxes on North Slope oil production. Amid the Biden administration’s existing anti-energy policies, pursuing a similar approach at the state level would be inexplicably foolish.

The energy tax proposal at issue clearly amounts to a ploy by extreme environmental activists, who seek to exploit Alaska’s budgetary issues to strike a blow against American energy producers within the state, unconcerned by the resulting loss of critical jobs.

Additionally, the proposed tax threatens vital oil drilling projects like Willow and Pikka on the North Slope, projects that are not only crucial for Alaska’s economy but also for America’s energy security.

Amid that adversity, however, voices of reason and resilience remain.

Namely, many conservative and moderate Democratic leaders have taken a stand against these reckless tax hikes, placing Alaskan interests first despite overwhelming pressure from extreme environmental activists. Their courage in the face of such pressures merit commendation. They understand the potential consequences of the proposed energy tax on Alaska’s prosperity and energy independence.

In that same vein, Gov. Mike Dunleavy has established his own legacy as a strong and capable conservative leader. With regard to this issue, he has earned deserved support by keeping promises, including his commitment not to raise taxes on Alaskans without a statewide referendum.

As the state grapples with difficult budgetary and economic options, however, it’s essential that Gov. Dunleavy upholds his earlier commitment and refrains from embracing new taxes that could tarnish his legacy while weakening Alaska’s economic position.

The issue of energy independence also remains a paramount concern, especially given the geopolitical threats posed by countries like China and Russia. Gov. Dunleavy has remained at the forefront of championing efforts to safeguard our energy independence, which explains why he’s a leading contender for a future cabinet position in a Republican administration.

Whatever Gov. Dunleavy’s future, the proposal to tax Alaskan energy has the potential to inflict severe damage on the state’s economy, its energy industry and the nation’s broader energy security. Conservative and moderate Democratic leaders must continue to resist such tax hikes, and Gov. Dunleavy must stay true to his promise of not imposing new taxes without a statewide referendum. Collectively, in this pivotal moment they must safeguard Alaska’s economic prosperity and energy independence, especially amid economic uncertainty and other global challenges.

By standing together, Alaska can weather that ongoing storm and emerge stronger, reinforcing its position as an energy powerhouse and bastion of American energy security.

Timothy Lee is senior vice president of Legal and Public Affairs at the Center for Individual Freedom.

Originally published by The Center Square. Republished with permission.

To read more about energy independence, click here.

To read more about threats to Alaska’s energy economy, click here.

Timothy Lee
Timothy Lee
Timothy Lee is senior vice president of Legal and Public Affairs at the Center for Individual Freedom.


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