How to tell if ACES helps or hinders?

A week's worth of hearings on the state's oil tax hasn't done much to resolve a debate dominating the legislative session and this year's gubernatorial race.

Is the state's oil tax, Alaska's Clear and Equitable Share, working as planned to spur investment in North Slope oil fields, spinning off a boon of high-paying jobs and a continuing flood of money into state coffers?

Or does the tax hinder investment by offering too little reward for the risk companies take spending millions, putting future oil development -- and the state's share -- at risk?

Hours of testimony from the state, industry and consultants before the Senate Finance Committee last week and early this week seem to show that the more lawmakers know, the more there is to still learn before making any decisions that could have significant impacts on Alaska's future.

"Is it that the 20 percent tax credit needs to be increased? Is it that there's too much slope to progressivity?" Sen. Bert Stedman, R-Sitka, and committee chair, asked. "Or is it these other economic and geopolitical issues at hand that are distorting the results of our basins? That's what we're trying to sort out."

The bottom line is that Alaska doesn't know, and probably won't without more information that companies say is confidential in order to maintain competitiveness.

"We don't have the evidence that says why certain things are happening," revenue commissioner Pat Galvin said in an interview. "I'm not going to tell you the increased spending is because of ACES for the same reason I can't really directly refute Conoco or BP saying they're spending less. They're spending less, but I can't tell you it's because of ACES."

As difficult as it is to assess whether ACES is working, predicting outcomes of tax changes now being considered is just as challenging. The word from the industry is that the state's tax structure doesn't leave companies enough profit when oil prices are high, and gives incentives to exploration, instead of to big, established fields like Prudhoe and Kuparuk. Production from those big fields supply the cash that allows companies to reinvest in exploration.

Testimony also indicates that there's simply no telling whether the tax regime, passed in 2007 with bipartisan support, is working or not. Not enough time has passed for a thorough analysis, and the interval was wracked with unpredictable swings in oil prices and a world economic crash that hit many oil companies hard.

"Over the course of the last three years, we had huge swings in oil prices at the same time we made significant adjustments in our fiscal system," Galvin said. "At the same time, we're in the middle of a transition with regard to the players on the North Slope ... All three of those things are at play when we look at the investment experience."

Alaska's oil fields are among many world-wide, and pale in scale to those in some countries, like Iraq, where recent gains in political stability have drawn producers like flies to honey. Changes to the tax structure may not impact the investment decisions world-class companies like Exxon Mobil, ConocoPhillips and BP make.

"We are not the center of the oil universe, even though oil is the center of our universe," Sen. Joe Paskvan said. The Fairbanks Democrat has a keen interest in the issue, and sat in on the Finance meetings.

"We have to recognize that there are other markets in the world, and there are others making decisions," he said. "Many of those, we have no control over ... I don't know that adjustments in our (tax) credit structure or our production tax necessarily has a direct correlation with what happens in the next couple of years."

Administration consultant Rich Ruggiero of Gaffney, Cline and Associates, a Houston-based firm that operates worldwide, said there hasn't been any real change in investment patterns in Alaska as the state shifted tax plans twice. More than 70 percent of the big companies' exploration and spending money is spent outside of the U.S.

That leaves Stedman thinking there won't be much movement on any of the tax-related bills on the table this session.

"I don't see a big upswell of support in the building (for changes)," Stedman said. "We've got to give ACES more time."