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Democrats criticize Gov.'s tax bill

Posted: June 11, 2013 - 4:36pm  |  Updated: June 11, 2013 - 11:06pm

Democrats on Monday challenged recent statements made by Gov. Sean Parnell that addressed a recent trip overseas to assess and compare tax structures of oil industries in the North Sea.

When Parnell went before the Juneau World Affairs Council last week he championed the signing of Senate Bill 21, a recent overhaul of Alaska’s oil tax structure, falsely likening it to progress made overseas.

“Like Alaska, part of the North Sea’s appeal is that there always seems to be more oil to find,” Parnell said. “It’s been described as being like ‘fancy layer cake’ because it has multiple geologic horizons. That means there are always new opportunities opening up.”

The governor mentioned that in 2008 the U.K. gave “extremely favorable tax treatment” to costs that helped legacy fields and noted that in 2009 a “new field allowance” was brought forth billions in new investment. In the end, there’s no way to quantify or compare that to the approach of the Alaskan government or its take.

“It’s ironic the governor keeps talking about the U.K.,” said House Democratic Leader Beth Kerttula, D-Juneau. “The U.K.’s North Sea changes only applied to new production, much like the bill we proposed, they didn’t give away billions across-the-board like the governor’s bill.”

Last session, House and Senate Democrats introduced a similar bill targeting tax incentives to oil already being produced. Senate Bill 50 also offered incentives that were not only tax-based but also non-tax items to encourage new development.

“With the passage of the More Alaska Production Act this year, we gained more stability in our tax regime, analogous to the Norwegian system,” said Parnell. “By eliminating progressivity under ACES and going to our 35 percent tax rate.”

The argument against SB 21 is that it cuts underlying taxes to current production and even deeper cuts to what the bill calls “new oil.”

A legislative research report in February calculated projections for the six fiscal years after the bill was signed into law and found that the elimination of a mechanism called “progressivity” — an increased tax levy as production increased — would slightly offset the increase in the base tax rate, but not enough.

“We have not been getting a fair share for our resources for years. To use Norway as an example was not a good idea on his part,” said Sen. Bill Wielechowski, D-Anchorage. “I think what this report shows is that it dispels some of the statements he made.”

The report emphasized that the projected impacts do not account for additional oil production, the purpose of SB 21. Nor does it account for fluctuating oil prices.

The Governor’s Office dispelled those criticisms.

“There is no disputing that tax reductions spur new investment. Alaska’s oil comeback is underway,” said Parnell’s spokesperson Sharon Leighow. “We are already seeing the positive effects of the More Alaska Production Act with companies, including ConocoPhillips, BP and Repsol, announcing billions of dollars in new investment and setting their sights on increasing oil production in Alaska.

What BP announced last week was “that it is planning to add $1 billion in new investment and two drilling rigs to its Alaska North Slope fields over the next five years due to changes in the state’s oil tax policy signed into law this month by Gov. Sean Parnell.”

This accounts for $200 million each year, far less than the tax cut they’d receive.

Democrats also released an online ticker late Monday that takes into account the amount of money Alaskans are losing in relation to what they called “Parnell’s oil wealth giveaway.”

“We gave them tax breaks for oil they already told us they’d produce,” Wielechowski said. “That’s just bad business.”

The ticker is based on cost estimates from the final bill’s fiscal note.

As of press time the counter was rising past $99,800,000.

• Contact reporter Kenneth Rosen at 523-2250 or at kenneth.rosen@juneauempire.com.

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