Committee bill limits scope of Alaska oil tax cut

Floor vote possible this week

JUNEAU — The House Finance Committee unveiled what is intended to be a more limited version of Gov. Sean Parnell’s plan to cut oil production taxes Monday.


Among other things, the bill limits to seven years the length of time a company can be taxed at a lower rate for new production and sunsets a tax credit for well-lease expenditures.

It also strips several provisions added by a prior committee, including a tax credit for hiring Alaska workers that the state officials said added an indeterminate cost to the bill.

The goal of the House’s Republican leadership is to pass from committee a bill that a majority of members can support. Leaders of the GOP majority, including House Speaker Mike Chenault and Rep. Craig Johnson, believe — as the governor does — that urgent action is needed to address the issue of declining oil production.

House Democrats, though, remain unconvinced, seeing the bill as little more than a corporate giveaway with no assurances that industry will invest more. And members of the Senate’s bipartisan majority have expressed skepticism, if not outright opposition, to Parnell’s plan.

Revenue Commissioner Bryan Butcher told the committee Monday that the administration hopes this is the right answer, and he said he believes industry will see this as a material change. But he said he can’t read the future, little comfort to Rep. Mike Doogan, D-Anchorage, who said he’s heard nothing that makes him even slightly interested in passing the bill.

Chenault wants to get a bill to the House floor for a vote this week. Time is of the essence, with the Legislature currently scheduled to adjourn April 17. Parnell said he doesn’t intend to call a special session but made clear his desire to have a bill pass this year. Last week, he indicated he was open to lawmakers’ ideas, and possible compromise.

The current tax regime features a 25 percent base rate and a progressive surcharge triggered when a company’s net profits top $30 a barrel. The tax structure, championed in part by then-Gov. Sarah Palin, was intended to have the state share with industry during the good times.

But critics of the tax say $100-a-barrel oil was virtually unheard of at the time the bill was passed, and industry representatives say the surcharge eats too deeply into their profits, ultimately affecting future investment decisions.

The Department of Revenue, in a report released in January, said it could not say whether the tax was helping or hurting industry because the state had tinkered so much with taxes over the last several years.

The bill under consideration by the finance committee keeps in place the tiered tax rate that Parnell proposed. But it sets a 15 percent base rate for wells that had not been in production before Dec. 31, 2008, and ends that lower rate after seven years of sustained production. (Parnell didn’t have the sunset.)

It also retains a cap on progressivity and subjects incremental amounts to the surcharge, a key aspect of Parnell’s proposal.

The committee asked the Department of Revenue to provide new estimates for what the bill will cost; those are expected by Tuesday.


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