On Alaska And Oil

There has yet again been talk about what Gov Palin did with the oil companies being a so-called “Windfall Profits Tax.”

It’s not.

However, while the explanations given thus far for why not are accurate, they may not be clear to someone who doesn’t know what, exactly, is going on.

Let me try to explain.

Let’s assume that you own a piece of land. On that land is valuable timber that a logging company comes to you about harvesting. You agree to let them cut down those trees. You charge them for every tree. You still own the land and every tree that is not cut down and you get paid for every tree harvested.

That’s what’s happening in Alaska with oil. Gov Palin didn’t like how much was being charged for the oil that was being harvested. She increased the price.

Still don’t get it? OK. Let’s say you own a house. You own the piece of land it’s on. You own everything Under your home (coal, oil, natural gas, gold, whatever). You are approached with an offer to buy those resources from you. You agree to sell them. The company that bought them now has to go Get them. And all without disturbing your house or the surface of your land.

The vast majority of the land in Alaska is either owned by the State of Alaska or the Federal Government. No private entities have purchased that land since it was originally purchased by the Federal Government from the Russians.

So…Original owners: Russian EmpirePurchasers: USA Federal Government under President McKinley at the urging of Secretary of State Seward.Price: $7,200,000Date: 1867

Land purchased over the years by private companies and persons over the next 90 years.

Alaska becomes the 49th state in 1959Large tracts of land that have Not already been purchased by private entities are Given to the new State by the Federal Government which retains the rest.

Alaska andthe Federal Government continue to sell land to various private entities.

1968, oil is discovered in Prudhoe Bay.

Alaska sells the oil to various oil companies (again, private entities). Those oil companies need land on which to build their rigs and roads. Alaska Rents (leases) them that land.

2007, Governor Palin raises the price the State of Alaska is demanding for their oil.

None of this includes taxes on the oil companies by the state of Alaska; any and all of those are a separate issue altogether. These companies are merely purchasing a raw material and renting the land on which their extraction and transportation facilities operate.

Hope that helps.