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Emails show public divided on Gov. Sean Parnell's tax cut plan

Posted: April 2, 2011 - 10:10pm
House Majority members Rep. Mike Hawker, R-Anchorage, left, Rep. Craig Johnson, R-Anchorage, Rep. Anna Fairclough, R-Eagle River, Rep. Eric Feige, R-Chickaloon, applaud Gov. Sean Parnell as he visited their press conference after passing his oil tax changes on Friday.   Michael Penn / Juneau Empire
Michael Penn / Juneau Empire
House Majority members Rep. Mike Hawker, R-Anchorage, left, Rep. Craig Johnson, R-Anchorage, Rep. Anna Fairclough, R-Eagle River, Rep. Eric Feige, R-Chickaloon, applaud Gov. Sean Parnell as he visited their press conference after passing his oil tax changes on Friday.

JUNEAU — For months, Gov. Sean Parnell has expressed confidence in his plan to cut oil production taxes as a way to spur new development. But an initial review of emails received by his office shows a public deeply divided on whether it’s the right thing to do.

The Associated Press reviewed nearly 140 emails and letters that Parnell received from constituents, lawmakers and others, dating to at least December, as part of a public records request. The documents include form letters, resolutions, letters or petitions from municipalities or groups, emails to legislators that were forwarded to Parnell; instances of the same person writing at least twice; and some messages from out of state.

The records showed roughly 63 writing in favor and 56 against, with the rest asking questions, taking no clear position or digressing to another issue. A state public records official said there are some additional records that could be made available as early as this week.

The split is in line with what the governor’s office reported on March 21: At that time, his office said that over the last six weeks it had received 111 items, 54 in support and 49 against, with others that were neutral or asking questions.

Parnell and leading House Republicans believe the current tax structure is out of whack and that immediate action is needed to encourage new investment and stem the trend of declining oil production. But top senators don’t believe the state has the information it needs to make a sound policy call and say they won’t be rushed, or pressured, into making a decision.

The emails reviewed by the AP frame the debate in stark, sometimes colorful, terms, and underscore the gravity of what the Legislature is grappling with.

Supporters of a tax change describe job losses in oil-service industries and warn of a looming shutdown of the trans-Alaska pipeline — Alaska’s economic lifeline — if the current situation isn’t improved. Allen Breck of Wasilla, lamented that bills dealing with specialty license plates and naming an official state firearm have captured attention among lawmakers this session.

“If they don’t get their heads out of the sand and address the (real) issues, none of that BS they are dealing with now is going to matter,” he wrote in a message, entitled Jobs, on March 18, adding: “We need you to express the urgency of this matter.”

But opponents of Parnell’s plan said they hadn’t seen proof that a change in the tax structure is warranted. They question whether Alaska would get anything in return for cutting taxes and if the state would have enough money to invest in other forms of energy or infrastructure projects.

Some even invoked the name of Parnell’s predecessor, Sarah Palin, who championed the existing tax structure, known as Alaska’s Clear and Equitable Share, or ACES, when she was governor in 2007.

“That was the ONE thing Sarah Palin did that I agreed with, going rogue, bah,” wrote Charlotte Tanner of Ward Cove. “But at least she attempted to make them pay a pittance of what they should for using our state.”

ACES features a 25 percent base tax rate and a progressive surcharge triggered when a company’s net profits hits $30 a barrel; the tax structure also offers a suite of tax credits. The idea was that the state would help companies on the front end but would also share with them in the good times, when oil prices are high.

The tax generated $6.8 billion in fiscal year 2008, a period marked by high oil prices and profits. It generated more than $3.1 billion in 2009, when West Coast oil prices averaged about $68 a barrel, and just under $3 billion in fiscal year 2010.

Parnell said the biggest complaint he heard from industry was about the progressive surcharge. Companies have said the surcharge eats too deeply into their profits, affecting future investment decisions in Alaska.

Parnell has proposed, and the state House has passed, a measure that would give new wells a break on the base tax, as well as cap the surcharge and change how it’s calculated.

The Department of Revenue has estimated the state could lose up to $2 billion a year in revenue by fiscal year 2017 if there’s no new production, though Revenue Commissioner Bryan Butcher has called that a worst-case scenario and said he couldn’t see the Legislature or governor not intervening if production didn’t pick up.

Even if production by that time ran 20 percent above forecasted levels, the department has projected the tax-rate change alone could mean $800 million less in revenue. Supporters see it as an investment in the state’s future and a righting of an overreaching tax law; critics call it stunning.

It’s estimated that Alaska currently has more than $10 billion in reserves.

Michael Meredith, of Soldotna, asked Parnell not to change the tax structure. “We are just starting to receive what we are owed,” he wrote.

Don McNamara and Donna Rae Faulkner, of Homer, said they could “not be more opposed” to Parnell’s plan and were “amazed” by his support of it.

“DON’T GIVE AWAY OUR FUTURES!!!” they wrote.

Oil and gas companies were among those who sent emails and letters to Parnell, urging a tax change.

In December, William Armstrong, president of 70 and 148 LLC, wrote that the decline in production on the North Slope is partly geologic, since fields mature, but “more of a man made problem.”

“I can speak clearly and plainly on these issues as I have invested substantial amounts of money in Alaska and at present I am trying to find new partners to invest even more significant amounts with me in order to develop new oil fields in Alaska,” he said. (In March, Repsol E&P USA Inc. announced it was working with 70 & 148 LLC and GMT Exploration LLC to develop leases over a 772-square mile area on the North Slope.)

“We are one of if not the number one proponent and instigator of new oil and gas projects in the state, and we are running into a full head on collision with a bad tax law,” Armstrong wrote. “ACES is killing the desire to work and invest in Alaska.”

Rob McWhorter, of Anchorage, told Parnell he strongly supports his tax cut plan.

“We must take less in order to have more!” he said.

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