Kelly, Gara in oil tax duel at Chamber event

Rep. Les Gara D-Anchorage paid for his tardiness at Thursday’s Chamber of Commerce Business Roundtable by ceding the mic to Sen. Pete Kelly R-Fairbanks.

Gara was booked to speak against Gov. Sean Parnell’s progressivity-eliminating Senate Bill and for an oil tax House Bill stalled in committee. Kelly trumped Gara’s stump with a bit of his own lower tax rhetoric.

“The world is in the oil game,” Kelly said, “We should be in the oil game.” Outside oil markets “have kicked our policy-maker’s rear ends.”

Kelly laid blame at the feet of the state’s five-year-old Alaska’s Clear and Equitable Share oil tax structure. ACES, Kelly said, slowed Alaska’s oil production to a “dribble.”

All this during a time when the state has spent its oil tax royalties “like Paris Hilton on crack,” Kelly said. “The party is over.”

To remain competitive, Alaska must sweeten its tax deal with oil producers, Kelly said. Oil producing states such as North Dakota and Texas have already drawn off potential oil investors, he said.

“[Investors] are going to invest in places a little more competitive,” Kelly said. “They are not playing chicken or punishing us. They are just doing their jobs.”

ACES replaced Petroleum Profits Tax in 2007.

Rep. Les Gara said he preferred if incentives given to oil companies came with provisions.

Senate Bill 21 has passed the Alaska Senate and is moving in the House. The bill’s removal of a tax that increases as oil company profits increase would send Alaska off a fiscal cliff, Gara said.

“It’s a roughly $1 billion giveaway,” Gara said. “We give that money to BP and say ‘spend it wherever you want. Do whatever you want with it.’”

Gara said he prefers a bill that gives tax breaks for increased production. A bill that helps developers finance processing facilities and incentivizes the production of viscous oil through tax breaks.

“You get tax breaks if you increase production,” Gara said. “You produce, we’ll reduce.”

Lowering taxes alone won’t bring production back to Alaska, Gara said.

“We’ve been fighting decline since 1998 with different tax schemes,” Gara said.

Alaska’s future lies in its small- to mid-sized oil companies, Gara said. The state is not going to get major new exploration by large companies, he said.

Alaska can’t stop an oil boom in another state, Gara said. North Dakota, Texas and Alberta Canada have a lot of oil. Where these states trump Alaska is in the novel use of technology.

“You can’t stop technology,” Gara said. “What we can do is try to get them to come back here.”

Gara said he plans to fight Senate Bill 21 when it enters the House Finance Committee for a hearing.

Contact reporter Russell Stigall at 523-2276 or at russell.stigall@juneauempire.com.

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