As the current legislative session heads into the home stretch and the electoral season approaches, Alaskans increasingly hear the slogan “It’s our oil (and gas)” as justification for various proposals and positions.
While the slogan makes for good rhetoric, it is important Alaskans keep in mind that, although it’s our oil and gas, it’s the oil companies’ money that discovers, develops, produces and markets, and — hopefully — will continue to explore for new resources. Without their investment, our oil would still be in the ground, and according to Scott Goldsmith of UAA’s Institute for Social and Economic Research, Alaska would look a lot like Maine, with high state income and sales taxes, no dividend, and a very small local economy.
Theoretically, the development of Alaska’s resources could have been handled differently. When oil was discovered in the Norwegian sector of the North Sea, for example, the government established and funded a state owned corporation (Statoil) that put the country’s money in the ground alongside private industry. While the effort required significant capital and exposed the government to substantial financial risk, the net result today is that Norway has an entity capable of taking the lead in exploring new areas if private industry is hesitant to do so. Some other countries follow the same model with varying degrees of success. Continue reading