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Senate panel dashes hope for Parnell’s oil tax bill

Posted: April 13, 2011 - 9:40pm

JUNEAU — While the governor’s plan to cut oil production taxes is effectively dead this year, the efforts to build public support for a tax rollback aren’t.

On Thursday, the president of BP Alaska plans to address “specific commitments” his company is willing to make “under a more favorable fiscal structure.” Meanwhile the leader of the Make Alaska Competitive Coalition, a group waging a PR campaign in support of tax changes, is set to address the Juneau Chamber of Commerce.

“Clearly when we engaged in this, our purpose was not to direct our message at lawmakers or get involved in the process,” coalition spokesman Jason Moore said. Rather, it was “to educate a broad cross-section of Alaskans. I think we’ve been able to bring the issue to light but a good chunk of work remains to be done.”

The Democratic co-chairman of the Senate Resources Committee, Joe Paskvan, said Wednesday he has no plans to bring up Gov. Sean Parnell’s tax bill before the Legislature’s scheduled adjournment Sunday. This follows a rare floor speech by Senate President Gary Stevens, who on Monday laid out for the public the bipartisan leadership’s qualms with passing a tax bill this session.

Stevens cited conflicting data, on issues like jobs and the likelihood for the trans-Alaska pipeline to shut down in the coming years due to declining oil. He said lawmakers didn’t have the information they needed to make a policy call and that the Senate wouldn’t be “bullied” into making a decision.

Parnell’s spokeswoman, Sharon Leighow, said it is “unfortunate that Sen. Paskvan has decided to leave Juneau without a plan to increase oil production and create jobs for Alaskans.”

Sen. Bill Wielechowski, D-Anchorage, said it didn’t need to be that way. The Legislature is scheduled to meet for 90 days and he said he believes a bill could have passed this year. But he said the administration was “just poorly prepared.”

During the last big fight over taxes, in 2007, when Sarah Palin was governor, Wielechowski said he had the Revenue commissioner or other department officials in his office “literally almost every day,” sharing data and answering his questions. He said he started “adamantly opposed” to the proposal but that the administration was willing to work toward a compromise.

Today, he stands as one of the existing tax structure’s staunchest defenders.

Wielechowski said the only time he met with the new Revenue commissioner in his office this session was when the commissioner, Bryan Butcher, asked that Wielechowski waive his confirmation from hearing.

Leighow declined comment on what the administration may or may not have done differently in making its case.

Critics of the bill also cited a lack of firm investment commitments from the industry if the state cut production taxes. Industry representatives said repeatedly that they couldn’t make specific commitments but noted that changing the tax would make the state more business-friendly.

Last week, the chairman and chief executive of ConocoPhillips, James Mulva, said the company was prepared, in the short-term, to make a myriad of new investments if the tax were changed, including increased North Slope drilling and pursuing more satellite developments and projects like a gas partial processing plant.

Leaseholders in Alaska have a duty to produce, and some lawmakers, like Wielechowski, believe these are things ConocoPhillips should be doing.

BP Alaska spokesman Steve Rinehart declined to say what specific commitments that company’s president, John Minge, would outline. “But generally, with tax reform, more projects and more prospects become economic,” Rinehart said.

When asked why the company waited to address the issue, when the Senate has turned its attention to other issues, Rinehart said the debate doesn’t end with the session. Leading senators have said they want to work on the issue during the interim and resume the debate when the Legislature reconvenes in January.

“We see this conversation continuing, and we’re looking for ways to help people understand where we’re coming from,” Rinehart said.

Moore said the coalition’s continued role is contingent in large part on financial support from backers. To date, the group has run ads advocating a change. “The intent is to continue the conversation,” he said.

The Republican-led House narrowly passed a version of Parnell’s bill that would give new wells a break on the base tax, as well as cap the progressive surcharge now triggered when a company’s net profits top $30-a barrel and change how that surcharge is calculated.

Parnell argued the proposal would make Alaska more competitive — by correcting a tax structure that’s now out of whack — and should be seen as an investment in the state’s economic future, helping to boost investment and now-declining oil production.

Critics labeled it a corporate giveaway that could cost the state billions of dollars in revenue.

Alaska relies heavily on oil revenue to run, and Parnell said he’d view failure to act on a bill this year as the Senate consigning the state to a future of declining oil production and cut capital spending to help the state conserve its budget reserves.

He hasn’t specified how big any cuts would be; Leighow said it’s too early to do so.

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