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Parnell wins early victory as oil tax reduction moves forward

Bigger challenges remain in House and Senate to controversial plan

Posted: March 30, 2011 - 9:13pm
Alaska Gov. Sean Parnell addresses a rally for legislation that would cut oil production taxes on Wednesday at the Denaina Civic & Convention Center in Anchorage. The governor took aim at what he called "do nothing senators" skeptical of his tax legislation that would dial back progressively higher taxes as oil prices increase. Parnell says keeping the status quo will to lead to an empty trans-Alaska pipeline.   The Associated Press
The Associated Press
Alaska Gov. Sean Parnell addresses a rally for legislation that would cut oil production taxes on Wednesday at the Denaina Civic & Convention Center in Anchorage. The governor took aim at what he called "do nothing senators" skeptical of his tax legislation that would dial back progressively higher taxes as oil prices increase. Parnell says keeping the status quo will to lead to an empty trans-Alaska pipeline.

Gov. Sean Parnell’s proposed oil tax reduction took a big step with this week’s passage by the House Finance Committee, but bigger challenges remain.

The House Finance Committee’s 8-3 vote Tuesday, along caucus lines, passed Parnell’s House Bill 110 on to the full House of Representatives. It’s a package of tax breaks aimed at spurring oil development.

Rep. Les Gara, D-Anchorage, called the proposal “a wing, a hope and a prayer,” with no evidence it would accomplish anything.

Rep. Mike Hawker, R-Anchorage, led the fight for the bill, after his appointment as a member of the committee Monday.

No less passionate than Gara, Hawker described the rollback of the state’s ACES oil tax law, adopted in 2007 over his objections, as “an investment in a more sustained and robust economy in this state.”

During an hours-long Finance Committee meeting Hawker described the ACES oil tax variously as “government take,” “government skim,” and “government confiscation of wealth from the private sector.”

House Bill 110 makes several ACES of changes, with the largest being a reduction in tax “progressivity” the increase in tax rates at high profits. Also in the bill were additional tax credits, reduced penalties for underpayment of taxes, and other reforms designed to make Alaska a more profitable place for oil companies to do business.

Estimates for how much the bill will cost in lost revenue varied wildly, but often settled on around $2 billion a year at likely prices.

But Revenue Commissioner Bryan Butcher strenuously avoided committing himself to dollar amounts. One reason: The estimates hinge on how much oil is produced, and whether HB110 succeeds in bringing Alaska new development.

Rep. Mike Doogan, D-Anchorage, wasn’t comfortable with that.

“We’re being asked to pass a bill we don’t know what it is going to cost, don’t know what its effects will be.”

Before the final vote, the Republican-led committee voted down attempts from Democrats to amend the bill, all along the same caucus lines as the final vote.

One, from Doogan, would have put a “sunset clause” in the tax reductions, ending them in several years if they don’t produce desired results.

Rep. Anna Fairclough, R-Anchorage, said the clause itself could cause problems.

“I’m fearful that a sunset date would still create uncertainty for those who are sitting on the sidelines waiting to make an investment,” she said.

House Bill 110 can now head the House Floor for a vote by the full body as soon as this week.

The governor’s oil tax bill is facing a much more difficult path in the Alaska Senate, however, where it remains in the Senate Resources Committee, its first committee of referral.

“I don’t see that bill moving out of even Resources,” said Senate President Gary Stevens.

After resources, it would still have go through the Senate Finance Committee, and then face a floor vote, all of which Parnell is unlikely to win, he said.

• Contact reporter Pat Forgey at 586-4816 or Patrick.forgey@juneauempire.com.

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