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Republican Gov. Sean Parnell’s proposal to reform Alaska’s oil production tax system cleared perhaps its biggest hurdle Wednesday night as the Alaska Senate approved the bill on an 11-9 vote.
Senate Bill 21, which has been modified several times as it has gone through the committee process, received senators’ approval at about 9 p.m., after a full day of amendments and debate.
Sens. Dennis Egan, D-Juneau; Bert Stedman, R-Sitka; Donny Olson, D-Golovin; and Gary Stevens, R-Kodiak, were the senators caucusing with the Senate majority who joined all five minority Democrats in opposing S.B. 21.
The version of S.B. 21 that passed the Senate Wednesday would increase the base production tax rate from 25 percent to 35 percent, institute a gross revenue exclusion for 20 percent of new oil, create a $5 per barrel credit offset, and eliminate the progressivity mechanism that significantly increases the state take as oil prices rise.
Opponents of the bill, which has an estimated negative fiscal impact of up to $6.23 billion through fiscal year 2019 if no new production is taken into account, argued that it represented too large a “giveaway” to oil companies without any assurance that production would increase.
“We have nothing,” Sen. Bill Wielechowski, D-Anchorage, said. “We have no commitments.”
The bill’s Republican proponents pointed to declining oil production and falling state revenues, pinning the blame on the ACES tax regime adopted in 2007.
“I don’t accept decline as inevitable,” said Sen. Pete Kelly, R-Fairbanks, co-chairman of the Senate Finance Committee. “If we accept that, then we have to accept failure as our future.”
Kelly argued that by accepting an immediate drop in anticipated revenues, the state may be able to extend oil production in the long term. He added, “We’re clinging on to this decline, and we’re going to ride it down if we keep ACES.”
Several bill opponents gave long speeches criticizing it, with Wielechowski speaking for about 40 minutes during the debate on passage.
Stedman, who spoke for more than 20 minutes shortly before Wielechowski, said S.B. 21 represents a substantial improvement over previous attempts to reform the oil tax system since the passage of ACES.
“It is recognized that this has been a three-year process, and we have come a long way,” said Stedman. “We just have a few more little smaller baby steps to go, compared to where we’ve been.”
However, Stedman said that he could not support the bill, mentioning the production tax cut for oil coming out of “legacy fields” — established oilfields like Prudhoe Bay and Kuparak — as a reason.
“My concern is we are moving cash to fix a problem in that area that doesn’t exist,” Stedman said.
All but one amendment offered to S.B. 21 failed, with a 2017 sunset date for the bill’s changes to Alaska’s oil tax system coming closest to passing. The same nine senators who voted against the bill supported the sunset date, while opposing the successful amendment offered by Sen. Peter Micciche, R-Soldotna, to remove a “step down” clause that would lower the base tax rate from 35 percent to 33 percent in 2017.
“I feel there’s little evidence to support the step down to the 33 percent base tax rate in 2017,” Micciche explained in offering his amendment, which was withdrawn and reoffered after an apparent loophole was spotted by Sen. Hollis French, D-Anchorage, and corrected.
In offering the sunset date amendment, Stevens said the Senate should be able to decide whether or not S.B. 21 had succeeded before letting it become permanent.
“We’re being asked in this bill, Senate Bill 21, to trust that this enormous tax decrease will lead to more oil in the pipeline,” said Stevens. “I hope that happens. I like to believe that that would happen. But if it doesn’t, this sunset clause would offer us an escape.”
Sen. Cathy Giessel, R-Anchorage, argued that provision would create “uncertainty” that could discourage new production.
“For explorers that are out there, it’s going to take them five to 10 years, optimally seven years, to even bring a well on,” Giessel said. “Why would you take that risk knowing that the rug could be pulled out from under you after you’ve discovered and begun developing oil? This creates tremendous uncertainty for our already … challenged environment.”
Speaking next, French said, “I can’t imagine a better way to light a fire underneath the oil industry other than to put this amendment on the bill. … They’d know they’d have to put up to gain the tax breaks that they’re going to get through this bill, or else it goes away in a few years.”
“I’m not sure that what we’re looking for is to light a fire underneath the belly side of the industry that’s out there,” said Olson. “I think all we’re looking for is a good-faith effort for them to show that they are serious about putting more oil through the pipeline.”
Sen. Mike Dunleavy, R-Wasilla, suggested Stevens’ proposed amendment was unnecessary, as the Legislature already has the power to repeal or change existing laws.
“It’s my understand that we can change the tax down the road if that’s something that we want to do and it doesn’t work,” Dunleavy said.
Sen. Lyman Hoffman, D-Bethel, voted against several amendments that were offered by his fellow minority Democrats.
Senate Majority Leader John Coghill, R-North Pole, gave notice that the Senate will also hold a vote on reconsideration of the bill.
• Contact reporter Mark D. Miller at 586-1821 or at mark.d.miller@juneauempire.com.
Comments (71)
Add commentThanks Dennis, Thanks Bert
You guys did what you could.
We already know that Cathy will sell out Alaskans, along with the rest of the republican House.
There are glasses clinking and cigars being lit in the corporate boardrooms tonight. No doubt a certain governor lobbyist will be well rewarded for bringing home the bacon.
NOTE THESE NUMBERS
206.7 million barrels
That's what the North Slope produced in 2012, according to AK-DNR. Let's watch what that number does and hold people accountable.
$109.06
That's the market price of a barrel of Alaska North Slope crude as of close of markets yesterday. Let's see if prices remain flat for the next five years like they're projecting. If it goes up...we just gave away billions for no reason.
....
And the multi billion experiment has passed it's first hurdle. It would be nice to have the separate accounting so we knew how much Exxon makes in Alaska; that way we would know if we are competive.
Senator Wilkowski did make some good points during the debate. I liked the ammendement he offered to require producers to produce a development plan prior to bidding. I could bid on a lease and so long as I was the high bidder I would win the lease even though I have no possible way that I could ever develop the lease.
I'm all for development and resource extraction but I'm not convinced that this was the best deal we could come up with for Alaska.
Just like The Newsminer editorial said it was Senator Click Bishop who cast the deciding vote.
Property owners in Anchorage should expect their taxes to go up $1,500 per year or see services cut based on the testimony on an Anchorage Senator.
Rough cut you're right about elections we will see changes in the Senate if this experiment fails. Trouble is it takes 5-7 years to develop a lease so we won't know if it worked until we pass along the untold billions of dollars. The next test for the Senate comes next week when they have to cut the budget to support their decision to cut taxes.
Thank you, Senator Wilechowski
For speaking the truth about what this bill will do. Too bad a majority of your colleagues weren't listening. They were determined to enrich the oil companies, and never mind the cost to Alaska. This is very hard to comprehend. Why the big rush to change the tax structure? The oil is there, and the companies are going to pump it out until it is gone. Alaska is their cash cow. Oil company executives themselves have stated this!! Why did the Senate sell out Alaska? Hopefully, the voters will remember this day.
SB 21 is indefensible
"
By CHANCY CROFT
A big fight is going on in Juneau, and it’s coming to a head. The stockholders of three of the world’s largest oil companies are trying to take money away from Alaskan citizens. So far, the Governor and the House have helped the oil companies. On Monday, twenty members of the Alaska Senate will have to decide whose side they are on.
"This takeaway/giveaway is Senate Bill 21, masquerading as an inducement for future development of Alaska oil resources. Nobody supporting the takeaway/giveaway even pretends any actual development by the oil companies is required. The oil companies don’t have to do anything to take $1 billion a year away from Alaskans. Nothing. Nada. Zero. Cutting to the chase, SB 21 is the reality of billions of tax breaks married to the pipe dream of an unidentified future bliss, if not marriage or a kiss, then possibly holding hands.
Revenue’s fiscal note calculates, without increased oil production, SB 21 will transfer more than $5 billion over the next five years alone from Alaskans to the stockholders of these oil companies. Starting in 2014, it will double from $625 million to $1.375 billion."
not my words, but pure truth
akexpat you read my mind...
You are right. The oil in the ground makes more profit than money in the bank. If the oil companies are slow to pump, that value increases faster than any bank interest rate. I do not understand why the Republicans have been in such a rush to get it out of the ground. Unfortunately though, I doubt many voters will remember to rebuke their senators in the next election. Too many voters have drunk the kool-aid of the promoters.
Big Oil is laughing all the way to the bank!
Many thanks to the 9 Senators who did the right thing. The other 11 are nothing more than tools of Big Oil. And yes, Big Oil is laughing all the way to the bank.
Big Oil is laughing all the way to the bank!
Many thanks to the 9 Senators who did the right thing. The other 11 are nothing more than tools of Big Oil. And yes, Big Oil is laughing all the way to the bank.
The Oily Eleven
This was the worst mistake in the history of the state of Alaska. Handing out cash to Republicans in room 604 of the Baranof backfired, so Big Oil bankrolled the election of 11 boot-lickers. The 1.3 billion dollars a year that Alaska will lose can never be made up. It's simple grade school math. Subtracting billions now to possibly add much smaller amount in the future is just wrong.
Comments
Clearly, doing nothing about the decline in production and the growing chance of TAPS either becoming seasonal or requiring some new technology to heat it during most of the year is unacceptable to most senators. However, I think for this to pass the House there will have to be better answers to some of the questions French and Wielechowski posed on the senate floor.
At the same time I endorse the approach and philosophy for Alaska that Dunleavy and Huggins expressed at the press conference, and I am not at all surprised if the Thespians and lesbians of Juneau do not. That approach and philosophy is that Alaska was not built by avoiding risk and waiting for handouts. Oil revenues have allowed us to forget that, and to generate and support a large cohort of bureaucrats and transfer payment queens, and greenies and space cadets, but now we need to once again learn to risk and to sweat.
Those who don't want to go for this ride can sell out and leave now. Maybe oil production will still decline such that TAPS will shut down but clearly the 2012 election showed that Alaskans want to try to turn this around. Where there is no risk there is no reward.
By the way, for those who don't understand politics, the Senate Majority members who were allowed to vote against this would have needed to vote for it had there not been the votes to pass it. Surely the Thespians in Juneau can appreciate the theater in politics even if Latitude cannot. Latitude may want to somehow blame Representative Munoz for a vote the senate took (how silly is that) but I and everyone I know are grateful every single day for her hard work, the high regard she enjoys with all other legislators, the sole Juneau seat on either finance committee she won and holds, and the honest help that so many Alaskans receive from her office throughout the year. It's to her office all of Southeast now goes to talk about the operating and capital budgets because she holds the single Southeast finance committee seat in either the house or the senate.
Makes me sick......
Watched and worked and worried to make sure Alaskans got a fair share of their oil and now look what has happened. I'm not a spiritual man but if I were I could tell you there are a lot of fine old time Alaskans who would be rolling in their graves right now.
To see this total lightweight as Governor in the first place is bad enough, but to see him engineer this travesty through our Alaska Legislature is just enough to make you cry.
Shame on every one of those who voted yes.
Guess there are going to be
Guess there are going to be lots of cabins rebuilt and a run on massage chairs...
Eleven to be exact...
Alaskans have spoken?
Uh, not really. That would have meant allowing us to vote on this bill but that didnt happen because they know the answer would have been a resounding no. Who in their right mind hands billions over with the hope they will increase production? There are no stipulations whatsoever, no timeline built in, nada. Not to mention we all are now paying them 2 subsidies to do their jobs, never mind the profits they have been reaping. One subsidy at the Federal level and one at the State level. Next up? Your PFD's.
Hey gdog, seeing how you think this is so great, Im sure you wont mind paying others share of property and sales taxes when those are increased because thats whats going to happen. Cities and towns share of State funding will be reduced and we know what that means. Less jobs for contractors and private business in reduced contracts and increase in taxes for all of us.
Most certainly, elections have consequences, the question is will Alaskans keep electing "leaders" that sell out their State.
kiki
Even before this legislation becomes law I mind paying for the indigents and miscreants now on the dole. People eating at the Glory Hole and trading their food stamp credit cards for booze, people producing illegitimate children to live in subsidized housing, and people dealing in illegal drugs and crowding our exorbitant prisons are some examples. So I already pay too much for others who choose lifestyles that burden society. We have all shared in the oil revenues but a case can be made that those revenues have disproportionately gone to those who refuse to work!
geedog
Your suggestion that the House will somehow hold this to a higher standard is less than a joke. The only thing I can see the House doing is trying to adjust the rate downward even further.
And no, I do not blame Cathy Munoz for the Senate vote. I blame her for marching lockstep with her bootlicking republican House colleagues, which she certainly will. She has already demonstrated that she is eager to hand our wealth over to oil companies for only a kiss and a promise in return (or at least that's all that we mere little people will be getting - who knows what the compliant legislators are getting out of it).
Your suggestion that Dennis Egan and Bert Stedman were "allowed" to vote against the bill rings false. These men have ethics (as opposed to certain representatives) and would have voted their consciences on such a momentous measure regardless of the political costs.
Well, nothing to be done now but remember those production and oil cost numbers and rub every supporters nose in them when the false promises don't bear out (and they won't).
@gdogs
There will be less money in the State coffers for everyone including projects which in turn impacts jobs at the local level and the end result is higher taxes for everyone. The programs you are referring to dont cost the State $2 billion per year. In essence, with this bill, there will be more people out of work. Everyone is going to be affected. I would suggest that the "indigents" you speak of arent the only ones on the dole, every Rep & Senator who votes for it are lining up their cushy job with the oil company as we speak. Not to mention, with your concerns over people on the dole, have you contacted your reps over the "office account" that they convert into increased pay for themselves? My guess is no.
glacierdogs,
you say "a case can be made that those revenues have disproportionately gone to those who refuse to work!"
Well, I dare you to prove it. Saying something like that means you have data to back it up. Since it's not true, you'll have a hard time backing it up. So, for the record, you're full of [filtered word]. And stop trying change the subject. You support this... fine... just know you're being bent over willingly.
Munoz
Not to mention, Munoz is already talking special session. So not only would they have passed the bill anyway, they are going to drag it out to get a special session in order to do it. Nothing like getting taken to the cleaners twice by this Legislature.
Ethics? Ethics for Sale! Ethics!
And how was it that two employees of the Oid Industry were allowed to vote? Hmmm. Ethics! Ethics for sale! Get your Ethics!...
Employees...
Bah! There were eleven employees of the oil industry voting. Twelve when you count Parnell.
The dog
and pony show was in full swing last nite. What a farce for Meyers and Micciche to "offer" to recuse themselves knowing full well it would be denied. If they had ethics they would have abstained from voting. Lesil's speech for the bill made me want to puke it was so full of bs. All one can hope is that the FBI is looking into these faux alaskans and start indicting for fraud and corruption asap.
A message from ConocoPhillips Shareholders
To: Governor Parnell and the 11 Senators*
From: ConocoPhillips Shareholders
Subject: Oil Tax Reductions
From the bottom of our hearts, we want to thank you for increasing our company's bottom line without one dime of extra investment. This is meaningful, as it means one thing;
BIGGER DIVIDENDS. FOR US.
So thanks again.
*Special thanks to our 2 employees who voted for our company's interest.
being as it
will be difficult to raise the mil rate on property, it will be interesting to see how much the value of my home will increase over the next few years so as to make up the shortfall through property tax increases. On the bright side a portion of state income tax is deductible from federal taxes. Have fun you nutcases who voted these folks in...also known as CBC v2.0!!
by the way,
this is what happens when you vote republican. You get a governor who redistricts in order to have long-time democrats removed so that a bill highly favoring corporate interests can get passed. Sleazy much?
Just remember the next time you vote that the "R" will bite you in the ass, inevitably. There is no benefit to voting republican. Not anymore. At one time they had some decency, but certainly that has disappeared.
Bring on the petitions
Ray Metcalfe is proposing a ballot initiative if SB 21 passes.
http://www.adn.com/2013/03/12/2822891/activist-proposing-initiative.html
Captain Zero for US Senate!
Now we are getting somewhere! Former oil company employee, Parnell is leading Alaska on the road to Perdition for Alaska's people. Captain Zero with the help of Conoco Phillips employee Peter Micciche and ten others ( unnamed by the Empire) who are bought and paid for by the oil lobby are squandering Alaska's future. Where is Hugo Chavez when we need him? Alaska should nationalize the oil patch and hire contractors to run it. If the tax structure is so horribly unfair for the oil companies, how did they survive when oil was $12 a barrel when Tony Knowles was gov? Call, email or text your Senators and let them know what a crime they are doing to our state by giving away billions with no commitment to any development. Meanwhile encourage Parnell to run for US Senate. Think what he could do for us there!
Thanks senator Egan,
Thanks senator Egan, Stedman, Wilechowski and the rest. Over to you, Mrs. Munoz. Will you sell us out like the senate majority did?
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Congrats to
Sens. Dennis Egan, D-Juneau; Bert Stedman, R-Sitka; Donny Olson, D-Golovin; and Gary Stevens, R-Kodiak, who wisely voted against this abortion of a bill. Mark well those who sold out Alaska. When the cosequences of this "legal" corruption begin to be strongly felt due to massive reduction in AK's revenues, those responsible should be held accountable. It's a dark time in Alaska politics. History will record these carpet-bagger lawmakers and their oil lobbyist leader as the lap-dogs they are.
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