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Gov: Senate bill doesn't address oil decline

Posted: February 29, 2012 - 12:04am

JUNEAU — Alaska Gov. Sean Parnell said the Senate’s work-in-progress proposal to cut oil taxes “offers no hope” for more investment and does nothing to stop the decline in oil production.

Parnell, who is pushing a steeper tax cut of his own that’s a nonstarter in the Senate, issued an email alert to Alaskans this week, urging them testify on SB192.

The Senate Resources Committee is working on the bill, which Parnell’s Revenue commissioner testified Monday offers a “modest” tax reduction compared to the current tax structure. Nearly 20 possible amendments have been offered in the committee but have not yet been acted on.

Testimony from industry groups and the public is expected Tuesday afternoon and evening.

Parnell said the bill “offers no hope for increased private investment, does nothing to stem the decline of oil production and builds no confidence in our state’s tax regime.”

He also called the bill a tax increase, despite Revenue Commissioner Bryan Butcher’s testimony.

Under the current tax structure, known as Alaska’s Clear and Equitable Share, or ACES, there’s a 25 percent base tax rate and a progressive surcharge triggered when a company’s production tax value hits $30 a barrel. The industry has said that the surcharge eats too deeply into profits at times of high oil prices and discourages new projects and new drilling.

The resources committee’s initial bill didn’t include a cap but Senate leaders called the measure a placeholder, saying they intended to fill in the details to address any problems that emerged during the committee process.

The latest version of the bill would cap progressivity and lower the progressive rate.

Compared to ACES, it would cost the state $125 million in revenue next year, $230 million in fiscal year 2014 and about $200 million from 2015 through 2020, according to the revenue department. One estimate shows the progressivity aspect alone of Parnell’s plan would reduce revenues by about $700 million next year, $1.3 billion in fiscal year 2014 and $1.1 billion in fiscal year 2015, figures that assume no change in production.

Parnell has said that companies have pledged at least $5 billion in new investment under his plan.

The chairwoman of the state Democratic party, Patti Higgins, in a missive of her own Tuesday, called the Senate’s approach a “reasoned alternative to the Governor’s massive giveaway.”

The Senate has a 16-member bipartisan majority.

Senate Resources Committee co-chairman Joe Paskvan told reporters Tuesday he worries that claims from Parnell and industry groups are misleading the public.

For example, Paskvan noted that the decline of oil flowing through the trans-Alaska pipeline has been ongoing since 1989, and isn’t some new phenomenon. Paskvan also said the Alaska Oil and Gas Association’s contention that oil production has plummeted 140,000 barrels a day under the current tax regime implies the tax structure is the cause. Paskvan, D-Fairbanks, said this doesn’t paint the full, true picture.

Senate President Gary Stevens, R-Kodiak, said it’s “purely deceptive” to say senators are trying to raise taxes. He said no one in the Senate has ever even talked about that.

The Senate last year refused to follow the House and act on Parnell’s plan to cut taxes, with leaders saying they didn’t have the information needed to make a sound policy call. Fears were raised during last year’s debate that the pipeline could become too expensive or hazardous to operate within the decade if oil throughput continued to decline. A federal judge, ruling in a property tax dispute late last year, determined there were likely decades of life left for the line.

“We’ve gone beyond some of those deceptions and confusions that were sort of heaped upon the public in order to frighten them,” Stevens said. “I hope we can not consider those again because they’re not true.”

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