David Bollier’s post yesterday – “The Interior Department?s Oil Lease Scandal – and its Lessons for the Commons” – brought to mind two alternative approaches to the use of oil revenues to benefit communities and families, and not just oil companies and governments.
In 1976, as the Alaska pipeline construction neared completion, Alaska voters approved a constitutional amendment to establish a dedicated fund: the Alaska Permanent Fund (www.apfc.org). The Fund is a state-owned corporation based in Juneau. The state constitution directs that a significant portion of revenues derived from oil development be allocated to the Fund for further investment on behalf of citizens of the state. As a result, the state of Alaska invests a minimum of 25% of oil and mineral royalty payments in the Fund. In 2006, the Fund reached a total value of $35 billion.
Earnings are used to increase the size of the principal, offset the impact of inflation on long-run returns – and provide annual dividends to the residents of the state, as a matter of right. Since 2000, annual dividends have ranged from $900 to nearly $2,000 per person. In other words, each year the Fund sends a check to every man, woman, and child residing in the state – providing a significant support to family income. In 2000, a high pay-out year, each individual state resident received dividends of just under $2,000, almost $10,00 for a couple with three children.
From a community wealth standpoint, such payments have a strong income-equalizing effect, since each individual receives the same amount, regardless of income level. Indeed, Alaska is the only state in the United States to have experienced an increase in income equality during the 1980s and 1990s. Research by University of Alaska economist Scott Goldsmith indicates that Alaska Permanent Fund operations played an important role in producing the recorded income equality gains. Since 1982, Alaskans have received more than $13 billion in dividend checks from the Fund.
More recently, the Alaska Permanent Fund is serving as a model for the establishment of the Niger Delta Fund Initiative (NDFI). The NDFI is designed as “an instrument to institute a transparent and equitable distribution of resource rents and royalties for sustainable development for Nigeria’s oil bearing communities.” In other words, the guiding principle is that communities from which oil is extracted should receive direct benefit in the form of royalties.
The goal of the organizers is that a majority portion of the oil royalties will be distributed directly to Nigerian citizens as individual dividend payments. Another portion of the oil royalty payments would be made available as low interest revolving loan funds for sustainable development. A smaller percentage of the funds would be earmarked for conflict resolution and environmental conservation programs.
Among the organizers of the NDFI are the Africa Center for Geoclassical Economics, Earth Rights Institute, and the Henry George Institute.
For more on the NDFI, see: http://www.earthrights.net/nigeria/intro.html.
Both the Alaska Permanent Fund and the Niger Delta Fund Initiative offer helpful and provocative models for alternatives to natural resource management, and for addressing the issue of who should benefit from the extraction of these resources. I would be interested in hearing from others who might know of other related examples.