"Willow project"

Falling oil prices have left a massive hole in Alaska’s budget, and lawmakers are scrambling to propose alternative revenue streams to close the deficit. A revenue forecast released last week estimated the state has a shortfall of more than $450 million heading into the next fiscal year.

Sen. Bill Wielechowski, an Anchorage Democrat, introduced a bill last week to increase oil tax revenue as a way to close the gap.

“It’s just really basic math — how are you going to make the math balance out? And it just doesn’t balance out at this point,” he said.

His bill, SB 114, would close the so-called “S-corp loophole.” That would require private corporations like Hilcorp to start paying the state corporate income tax of 9.4%.

The bill would also reduce oil tax credits and limit the expenses oil producers can deduct from their state taxes. Wielechowski estimates the bill could add more than half a billion dollars to state revenue each year. And, he said, “this is the year to do it.”

“We’ve got hundreds of teachers positions that are open, you’ve got hundreds of vacancies at the Marine Highway, you’ve got roads that aren’t being plowed,” he said. “I think people are really starting to see the impacts of not funding our government.”

House Majority members expressed doubts about the bill during a news conference on Tuesday. House Resources Committee Chair Tom McKay, an Anchorage Republican, argued increasing oil production — not taxes — is the solution to Alaska’s budget woes.

“By bringing forth oil tax increases, it does the opposite, it puts a chilling effect on investment,” McKay said.

McKay said the bill would create “uncertainty and instability” in the oil tax structure as ConocoPhillips’ recently approved Willow oil drilling project moves forward. According to his campaign website, McKay has worked as a petroleum engineer since 1980 for a number of energy companies, including Conoco.

Another bill, introduced Monday by Nikiski Republican Rep. Ben Carpenter, would create a 2% state sales tax.

Alaska has never had a statewide sales tax, and is among just a few states that don’t. The state also does not have a personal income tax, and is the only state to have neither. The largest proportion of Alaska’s revenue comes from oil.

Carpenter did not not respond to requests for an interview. But at a hearing Wednesday night, where he introduced his sales tax bill, he emphasized that it’s just one component of a larger plan.

“I don’t take this lightly, bringing forward a bill that would institute a sales tax on Alaskans,” he said. “If we were having a conversation that didn’t include a bunch of other components of a fiscal plan, I would not be sitting before you.”

More than 100 municipalities and boroughs around the state already have a local sales tax, between 1% and 7%, although Alaska’s largest city, Anchorage, does not have a local sales tax. The 2% statewide sales tax proposed by Carpenter would be collected on top of any local taxes. It would not make exemptions for groceries, medicine or other areas that have been exempted in previous sales tax bills, and in many other states.

This month, Carpenter also proposed a bill to reduce corporate taxes in Alaska, which he said discourages companies from doing business in the state. The bill would reduce the cap on corporate taxes from about 9% to 2%, and make rates the same for all companies, regardless of size. Carpenter said his bill would reduce the state’s revenue by about $300 million for the fiscal year.

Gov. Mike Dunleavy introduced a series of bills at the start of the year to set up a carbon sequestration industry in Alaska. The governor said carbon capture has the potential to bring “billions” of dollars to the state, but it’s unclear when it would start to generate revenue.

A federal judge could issue a decision as early as next week to temporarily halt construction of Willow, ConocoPhillips’ controversial oil drilling project in the National Petroleum Reserve.

Two lawsuits, filed by environmental groups and an Inupiat advocacy organization, aim to overturn the Biden administration’s approval of Willow. The plaintiffs have asked for an injunction to halt construction until the case is decided.

U.S. District Court Judge Sharon Gleason said she’d try to have a decision on the injunction by April 3.

The Interior Department’s decision to allow three drill pads and 200 oil wells was a blow to climate advocates. It drew applause from ConocoPhillips, labor unions and many constituencies on the North Slope, as well as Alaska’s Legislature and congressional delegation.

The Legislature and the trio who represent Alaska in Congress have taken the unusual step of jointly filing an amicus brief, to offer their perspective to the judge.

“We are working hard to get the judge to hear our voices — literally collectively, tens of thousands, if not hundreds of thousands of Alaskans — to convince her that this project going forward, of course, abides by the law, but is strongly in the public interest,” U.S. Sen. Dan Sullivan told reporters Monday.

The public interest is a big factor the judge must weigh in deciding whether to grant an injunction, Sullivan said.

“In many ways, discerning the public interest is what elected officials do all the time,” he said. “And so we thought it was very important to have a brief from all the statewide elected officials in Alaska, that lay out what we see as the public interest, which is to deny this preliminary injunction.”

Trustees for Alaska attorney Bridget Psarianos, who filed one of the lawsuits, said the amicus — or friend of the court — brief does nothing to negate her claim that the administration failed to follow environmental laws in issuing the Willow decision.

“This is unfortunately emphasizing Sen. Sullivan’s blinders — that the state government and oil companies and our own congressional delegation from Alaska have — to the impacts that Willow would have on local communities and global climate,” she said.

Nationally, opposition to the project built rapidly in February and early March. Anti-Willow videos on social media garnered millions of views, and young voters in particular say they feel President Biden violated a campaign promise.

Biden said last week that he was inclined not to approve Willow but was advised that ConocoPhillips would sue and likely win.

The company has held the Willow leases since the 1990s.

While climate activists unfurled an anti-Willow-project banner in front of the Interior Department headquarters near the White House Tuesday, President Joe Biden was inside, bragging about his environmental and climate record.

“My first year in office we protected more lands and waters than any American president since John Kennedy,” he said, to cheers in the agency’s auditorium.

He announced new monuments in Nevada and Texas, as well as a new marine sanctuary southwest of Hawaii that covers an area larger than all of Alaska.

But outside the building, the protesters weren’t impressed. They haven’t let up on Biden since last week’s decision approving Willow, ConocoPhillips’s plan to drill 200 oil wells in Alaska’s western Arctic.

They’ve launched a series of protests in Washington, D.C. that could undercut his message on climate change and alienate the young voters who supported his 2020 election.

Biden made action to reel in greenhouse gas emissions a central part of that campaign. His decision on Willow – the largest pending oil project on federal land – quickly galvanized opposition online, particularly among young people, who watched anti-Willow TikTok videos by the million.

So far, the in-person protests haven’t been of that scale, but the sustained focus could threaten to tarnish Biden’s legacy on climate.

“Biden keep your promise – stop Willow,” some 20 activists chanted Tuesday. They beat plastic buckets with drumsticks. For a backbeat, they played a recording of Biden’s voice on a loop, making promises in 2020 they say he broke.

“No more subsidies to the fossil fuel industry,” Biden said during a presidential debate. “No more drilling on federal lands. No more drilling, including offshore. No ability for the oil industry to continue to drill. Period.”

Baltimore art student Nadia Nazar is an organizer with a youth-led climate justice group called Zero Hour, part of a coalition she said organized the event at the Interior Department. She said they want Biden to feel the pressure when he makes future decisions on oil development, and to know that his re-election could be on the line.

“A lot of young people turned out and voted for him last election,” she said. “He made these promises to us. And the climate crisis is something that’s so important to not only us, but so many people here in the U.S.”

Protesters on Monday disrupted a presentation at a Washington think tank featuring White House climate advisor Ali Zaidi, and a group called Climate Defiance says it intends to blockade the White House Correspondents Dinner next month.

ConocoPhillips got approval this week for developing its Willow project in the National Petroleum Reserve-Alaska. But another area the state has been hoping companies develop, the Arctic National Wildlife Refuge, has received almost no industry interest. The Alaska Industrial and Development Export Authority is currently the only leaseholder in ANWR.

The state is sending millions of dollars to the federal government to hold the leases as the Biden administration reviews the leasing program.

Alaska oil and gas expert Larry Persily has an idea. He wants the state to consider selling carbon credits for keeping oil and gas in the ground in ANWR.

After laying out his proposal in a recent op-ed in the Alaska Beacon, Persily says that it’s a serious proposal even if it’s not likely to happen.

Listen:

This interview has been edited for length and clarity.

Larry Persily: I don’t think Alaska’s political leaders are willing to admit there will be no ANWR development. And like I said, you’d have to go and get the feds to cooperate because the federal law says if you got a lease, you got to produce it or get off the lot. And I think the argument would be not producing it and selling carbon credits does not meet that requirement. But to me, it seems an elegant solution. We don’t have to… the state could hold onto leases, make some money. The federal government could share in the credit of not developing it, which wasn’t gonna happen anyhow. I think there’d be a lot of buyers out there. They would find it very high-profile, opportunistic to pay for the credits of not developing ANWR.

Wesley Early: So you touched on this a little earlier, but can you give a quick overview of how we got to this moment regarding ANWR from the Trump presidency to the Biden administration?

Larry Persily: Sure. So Alaskans certainly have been wanting to develop ANWR pretty much, I think since Earth was created in the Big Bang, probably that long. That’s been argued about for years and years. There was legislation passed by Congress that said there will be lease sales. There was one that was rushed through in the Trump administration, the very final days; essentially nobody bid but the state of Alaska. There were a couple of small non-oil and gas producers that put in very small bids and they later said, in hindsight, “We’ll give you back the leases, we don’t want them.” So the industry, I think, is looking at ANWR, looking at the high visibility of ANWR Arctic oil and gas development and they just don’t want any part of it. So the Biden administration came in said, “Hey, those were rushed leases under Trump. We’re going to put them under review. You can’t do anything. We’re going to think about it. We’re going to ponder some more. We’ll get back to you.”

Wesley Early: There’s been a lot of talk about carbon credits lately — essentially companies could purchase these credits to offset their own carbon emissions. And the governor’s also proposed allowing companies to lease depleted Cook Inlet oil and gas reservoirs to store carbon dioxide. What do you think of these plans to lower emissions while also making money for the state?

Larry Persily: Well, right now, anything that makes money for the state would be great because we refuse to tax ourselves, and oil is not exactly a growth industry, Willow aside. So I think the governor is proposing these carbon credits to divert attention from the fact his budget doesn’t balance. We do not have a diversified source of revenue. We don’t want to tax ourselves. So he’s conjured up that we could make billions of dollars by selling carbon carbon credits. There is a market for carbon credits, no doubt about it. Other places are doing it, but the purchasers of these carbon credits are getting more skeptical. They’re saying, “Wait, are you really… is this legit?” in terms of your promising not to log in the Amazon or you’re promising not to log in Alaska. There is growing skepticism in the market for carbon credits where companies want to know they’re real and it really means carbon is going to stay in the ground, not the atmosphere. And that’s why I think something like oil and gas that doesn’t get produced is much more attractive than trees that don’t get cut, which were never going to get cut anyhow.

Wesley Early: You mentioned earlier that your plan does have a hang-up in that federal law does say you have to drill in your oil and gas leases. How would the federal government have to shift things to make your plan work?

Larry Persily: Well, that would assume that I actually put legal research into it. I don’t know if it would take a regulation or a law. I think it probably would take a change in law, but it was also a column I wrote to just get people thinking, “Why are we holding onto these leases? Why are we paying $3.5 million a year for something that’s never going to return anything?”

Wesley Early: You note at the end of your op-ed, that this is a dream, albeit a “sweet dream.” From your perspective, how likely do you think your dream could become a reality?

Larry Persily: Probably not. I mean, I’ve dreamed about a lot of things in Alaska for 50 years and most don’t become reality. But I guess I also want to make the point, okay, you don’t like my dream — find another. Because right now you’re writing a check for $3.5 million a year on leases that are not going to produce because there is just no industry interest in it. So pick another dream or keep writing the checks for nothing.

Six conservation groups filed a lawsuit against the federal government Tuesday, a day after the Biden administration approved the Willow project — the $8 billion ConocoPhillips oil development located in the National Petroleum Reserve-Alaska.

The lawsuit claims federal agencies violated the National Environmental Policy Act by approving Willow because of its potential impacts to sensitive Arctic environments, subsistence users and climate change.

Tim Woody, a spokesperson for one of the plaintiffs, The Wilderness Society, appeared on Alaska Public Media’s “Talk of Alaska” Tuesday. Woody said Willow runs counter to the administration’s goal to cut greenhouse gas emissions in half by 2030.

“Part of that means we don’t commit to long-term, massive oil and gas extraction projects that will drastically increase greenhouse gas emissions over such a long period of time,” he said.

Opponents have termed Willow a “carbon bomb.” The 600 million barrels of oil it’s expected to produce over 30 years equates to adding 2 million cars to the road each year.

The other plaintiffs include Sovereign Iñupiat for a Living Arctic, the Alaska Wilderness League, Environment America, Northern Alaska Environmental Center, and the Sierra Club.

Rosemary Ahtuangaruak, the mayor of Nuiqsut — the closest village to the Willow site — has repeatedly condemned the project as bad for local residents’ health.

But many other Indigenous groups, including the Arctic Slope Regional Corporation and the North Slope Borough, support Willow. Nagruk Harcharek is president of Voice of the Arctic Iñupiat, based in Utqiagvik. He said on “Talk of Alaska” he looks forward to economic benefits in the form of jobs and dividends for locals on the North Slope.

Harcharek added that he believes the project will not threaten subsistence hunting in the area.

“Subsistence Inupiaq lifestyle that we live is important, it’s the most important for us,” he said. “So if there was ever a project that we thought would negatively impact that, in ways that would be irreparable, we would not be in support of that project.”

The approved version of Willow scaled the project back from five drilling pads to three to reduce potential impacts to caribou migration and subsistence users, according to the Interior Department.

As a concession to the Indigenous and environmental groups opposed to the project, the Biden administration also announced plans Monday to protect parts of the NPR-A and Arctic Ocean from any future development.

Woody is skeptical those plans will ensure much.

“They’re positive steps, we like them,” he said. “The problem is they’re what we call non-durable protections, meaning a future administration could overturn them and throw them out.”

Kara Moriarty, president of the Alaska Oil & Gas Association, said ConocoPhillips could apply to extend the project to more than three pads in the future.

“That’s always a possibility with any project approval. But I think at this point, they’re going to focus on what was approved … getting that done right and getting it done safely,” Moriarty said.

The three drill sites are projected to produce as much as 180,000 barrels of crude oil per day.

Both Harcharek and Woody expect that ConocoPhillips will begin work to ready the new pads for drilling within the next month.

The Biden administration announced Monday morning that it is approving a permit for Willow. That’s the $8 billion ConocoPhillips project in the National Petroleum Reserve-Alaska, the largest oil development in Alaska since the 1990s. And Sunday night, ahead of the Willow announcement, the administration said it would impose new restrictions on drilling in the NPR-A.

Alaska Public Media reporter Wesley Early spoke to Washington correspondent Liz Ruskin to learn more.

Listen:

The following transcript has been lightly edited for clarity.

Wesley Early: Liz, this is a victory for Conoco and everyone else who lobbied to get the Willow permit approved, right?

Liz Ruskin: Yes. The administration approved three drilling pads for Willow, which amounts to about 219 wells. That’s the same number as the Bureau of Land Management recommended in January. Conoco had wanted five drilling sites and 250 wells. So it’s slightly scaled back but proponents of Willow are calling this a big win. Certainly the congressional delegation is. So are groups on the North Slope that have been lobbying for Willow.

Wesley Early: What are these drilling limitations the Biden administration announced Sunday night, and what’s the deal with a Sunday night announcement?

Liz Ruskin: Yeah, it was weird. What kicked it off, I think is that Friday, Bloomberg reported – based on unnamed sources – that the administration was going to approve Willow. Then a whole bunch of other media outlets reported this, also based on unnamed sources. Then the reaction started pouring in from conservation groups and climate activists and other people who wanted to stop Willow. I think the Interior Department announced these protections when they did to try to blunt the criticism.

Wesley Early: Did it work? The criticism from environmental groups seems pretty loud today.

Liz Ruskin: Right. I’d say it didn’t really work, but it does add a smaller headline under the main one today. The main headline is “Biden allows Arctic oil development, enraging climate advocates.” The smaller one says “but he’s also imposing some limits on Arctic drilling.”

Wesley Early: What are the limitations and will they hinder future developments, beyond Willow?

Liz Ruskin: We don’t really know how much impact these measures will have and whether they’ll apply at all to land that’s already under lease, but we’ve got two categories of government action here. One is that the Interior Department says that they are working on new rules that would limit development on – or “protect,” depending on how you view this – 13 million acres of the reserve. That’s more than half of the reserve. The press release says it would seek the highest level of protection for at least some of the acreage, and that the limits would be applied to land already deemed sensitive or special. So we don’t really know the details and we likely won’t until the rules are put out for public comment, which the Interior Department says will be in a few months.

The administration also announced that President Biden will remove 2.8 million acres of the Beaufort Sea from possible consideration for oil lease sales. That strip of the Beaufort was the only remaining part of the Arctic Ocean under U.S. control that might have been considered for offshore drilling. That’s because in 2016 President Obama put almost all of the Chukchi and Beaufort Seas off-limits.

Wesley Early: The Willow project has faced criticism from some Indigenous and conservation groups for years, but it recently started to trend nationally through some coordinated social media advocacy, especially through the app TikTok. Can you talk about how that advocacy influenced the debate in the last week?

Liz Ruskin: Well, I’m not sure how much influence it had, since ultimately the decision didn’t go their way, but It certainly brought the debate to a lot more people and very quickly. It kind of put Willow on the map, nationally speaking. Especially for younger people who care a lot about stopping climate change. I think that awareness and that activism doesn’t disappear. I think we’ll see a replay when future Arctic developments are debated.

Wesley Early: Lastly, do you expect environmental groups will challenge this in court?

Liz Ruskin: Absolutely. And soon.