Myers gets it wrong on the Permanent Fund

By Mark Worcester

Updated: 1 hour ago Published: 1 hour ago

In his recent commentary, Sen. Robert Myers claimed that the “fundamental question” in this special Legislative session is “Who owns the oil?” He asserted that it is not the state, and that the Legislature should act in the special session to “enshrine the ownership of our resources by the individual in our constitution.” His assertion that this is an open question is incorrect.

The history, purposes and language of the Statehood Act, the Alaska Constitution and the Constitutional Amendment that created the Permanent Fund all make absolutely clear that the state owns the oil, and that is primarily dedicated to funding state government for the benefit its people. In Section 6 of the Statehood Act, Congress granted the Alaska 103 million acres of land. In interpreting that land grant, the Alaska Supreme Court noted that “(o)ne of the principal objections to Alaska’s admittance into the Union was the fear that the territory was economically immature and would be unable to support a state government,” hence “Congress … granted Alaska the mineral estate with the intention that the revenue generated therefrom would help fund the new state’s government.” This was decided in the court case Trustees for Alaska v. State in 1987.

Further, Section 6(i) of the Statehood Act provides that state could lease, but not convey ownership of the mineral rights in lands granted to the state. In voting to become a state, the voters explicitly consented to this restriction, and in accordance with this restriction, the Alaska Constitution provides for leasing (not grant or sale) of oil and gas rights on state land and requires all sales or grants of state land “contain such reservations as may be required by Congress….” This restriction of sale of mineral rights was addressed by the Alaska Supreme Court in the Trustees case, which held that Section 6(i)’s lease-only restriction also applies to “locatable” minerals, such as gold.

Thus, the state cannot sell or grant mineral rights to individual Alaskans. They are leasable only, with the revenues with lease revenues intended for support of state government expenses.

The language and history of the amendment to the Alaska Constitution creating the Permanent Fund provide no support for Sen. Myers’ contention that individual Alaskans “own” the oil or the proceeds from leasing. The amendment mandates that certain mineral revenues be deposited into the Permanent Fund. Deposited funds can only be invested, while earnings are deposited into the general fund. Nothing is this language suggests any individual ownership in mineral resources, revenues derived from these resources, or the corpus or earnings from the Permanent Fund.Likewise, the debate over the Permanent Fund Amendment did not in any way suggest any individual rights to the Fund. The Voter’s Pamphlet Statement in Favor of the Amendment argued that the amendment was necessary to “set aside a rainy day fund.” The statement said, “Now is the time to ask ourselves the question: ‘When the oil and gas is depleted, where will the funds to feed our giant government come from?’ The answer is: the Permanent Fund.”

Alaska is not so much different as it was at statehood: a geographically large and diverse state with a small population and a relatively small tax base compared to its fiscal needs. I have seen no estimates of potential revenues that could fill the gap of declining oil revenues other than earnings from the Permanent Fund. The Fund is doing exactly what it was designed to do: fund necessary state services as oil revenues decline. The PFD may have served the purpose of protecting the Fund when we were awash in oil revenues. However, a large, constitutionally protected PFD based on the false claim that it is the “people’s oil” would threaten the very purpose of both our lease-only oil and gas regime and the Permanent Fund.

Mark Worcester was an Assistant Attorney General in the Oil, Gas and Mining Section of the Department of Law from 1983-1991, then an in-house counsel with ConocoPhillips Alaska (formerly known as ARCO Alaska and Phillips Alaska). He was one of the attorneys representing the state in the Trustees case cited in this commentary.

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