Petroleum News reported that Governor Palin’s ACES tax formula, though impugned by some is working well and proving profitable for companies like ConocoPhillips. The company produces 12% of its petroleum products in Alaska, generating 29% of its profits (Cashman, 2009, ¶1).
“That production — approximately 290,000 barrels of oil equivalent out of 2.364 million boe per day worldwide — came from Alaska, and earned Conoco $244 million out of a company-wide total of $840 million in first quarter profit” (Cashman, 2009, ¶2).
Under the ACES formula, taxes on oil profits increase as the price of a barrel of oil increases. But taxes decrease with lowering prices (Cashman, 2009, ¶5).
Commentary
ACES is an aspect of Governor Palin that many people — particularly her conservative base — misunderstand. Aside from functioning as described by Ms. Cashman, ACES also gives a portion of those tax revenues back to the people of Alaska via rebates — up to $1200. Alaska’s state Constitution is populist in nature and Governor Palin is molded in that school of thought.
But, we see from the foregoing that ACES works — to everyone’s benefit. The oil companies benefit in lean times by a reduced tax rate. When prices rise, the tax formula is proportional to the increase. And the people of Alaska benefit by getting a portion of that tax revenue sent straight to them for use of their resource.
ACES was born out of Governor Palin’s subject matter expertise on energy and despite some protestations to the contrary makes Alaska an excellent venue in which to conduct energy-related business.
References
Cashman, K. (2009, June 14 Week of). Petroleum News launches new magazine about oil industry in Alaska, ‘Big Risk, Bigger Rewards.’ Petroleum News. Retrieved June 17, 2009 from: http://www.petroleumnews.com/pntruncate/936617849.shtml
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