JUNEAU — The Senate Finance Committee on Tuesday released an oil tax plan that scraps progressivity as we know it.
Instead of a progressive surcharge triggered when a company’s production tax value hits $30 a barrel, the Senate proposal calls for a progressive severance tax that would be levied on gross production after royalties, and levied solely on oil, thereby decoupling oil and gas for tax purposes and addressing the current dilution effect on revenues when oil prices are high relative to gas.
The bill also would have lower progressivity for fields outside the aging fields of Prudhoe Bay and Kuparuk, as a way to encourage new production. And it would have the Revenue department collect a range of non-confidential information related to oil and gas exploration, development and production that would be available to policy-makers and accessible to the public.
The bill retains the current base tax rate of 25 percent.
Industry has complained that the current surcharge eats too deeply into profits at times of high oil prices. The Senate’s approach is meant to provide a fairer split of profit oil between the state and industry.
Committee co-chair Bert Stedman said a flattening of the total government take percentage would start when oil prices hit around $125- or $130-a-barrel. From there, he said, the percentage going to government and industry is intended to stay fairly constant. Analysis presented by legislative consultants PFC Energy on Tuesday ran up to $200-a-barrel oil.
North Slope crude ended Monday at about $122 a barrel.
According to a fiscal year 2013 snapshot by PFC Energy, total state take, including taxes and royalties, at $130 oil would be $10.6 billion under the severance tax proposal. That compares to about $11.4 billion under the current system. The comparison at $150 oil is $13 billion under the severance tax option and about $14.2 billion under the current system, a difference of about $1.2 billion. This scenario includes exploration tax credits.
Stedman said he would be “flabbergasted” if industry didn’t consider the proposal a significant change. Industry officials are expected to testify Thursday.
There was no immediate fiscal note.
The bill still could change; Stedman, R-Sitka, said work continues both on a tax floor, to ensure the state doesn’t lose money if oil prices tank, and on ways to boost incremental production from Prudhoe and Kuparuk, long the mainstays of Alaska’s oil industry, where production has been declining.
Stedman said the committee would meet this Easter weekend, if necessary, as could the full Senate, if needed, to vote on the bill and get it passed over to the House.
The 90-day session is scheduled to end April 15. On Monday, House Speaker Mike Chenault said it was “very unlikely” an oil tax bill could pass by then. But a special session isn’t a foregone conclusion, if the House feels the bill is a bad one, for example, or that a compromise with the Senate on a tax bill cannot be reached.
Comments (14)
Add commentSo a $1.2 billion dollar give
So a $1.2 billion dollar give away to the worlds most profitable companies instead of a $2 billion dollar give away. Thats soooooo much better!
Maybe a compromise
Sean Parnell is a reasonable man. How about combining elements of BOTH plans? Make it a $3.2 billion giveaway and call it good.
Cathy Munoz will certainly support that (if the governor tells her to).
Why should oil taxes be fair?
"The Senate’s approach is meant to provide a fairer split of profit oil between the state and industry."
Taxes are not meant to be a fair. Taxes take from the wealthy and distribute to the poor. Taxing the oil isn't about socialist welfare ideology. The oil companys are making record profits on the oil from Alaska's public lands.
Just look around the world at the other oil patches and Big Oil will still want to drill even when they receive a much smaller percentage than they get in Alaska.
The propaganda campaigns Big Oil -- Misleading America
Newspaper article from today in a Seattle newspaper.
http://www.seattlepi.com/local/connelly/article/The-propaganda-campaigns...
@smith - prove all your
@smith - prove all your outrageous statements. Let's see some figures.
Taxes SHOULD be fair - they are NOT meant for income redistribution, as you also state.
I'm guessing you don't have the first clue about oil company profits. Do you happen to know the net profit margin of oil companies? Didn't think so.
"The Integrated Oil and Gas industry made an average profit of 6.2 cents per dollar of sales, which ranks #114 out of 215 industries by profit margin, and puts oil companies right in the middle of industries by profitability."
$1.2 billion vs $2 billion
So, we're still giving away $1.2 billion simply because the oil companies want us to, with no promises for increased production or anything else in return?
Why?
I see no point.
Any reduction should be contingent upon them giving us something in return. What have they promised? Virtually, nothing.
And I didn't see any promises or contingencies anywhere in this proposal.
A reminder to the Senate: You do not work for the Governor, you work for us, your constituents. Just because the Governor wants to give away billions of our dollars to his buddies doesn't mean you have to.
BTW, I've never liked the phrase that oil companies don't like progressivity because "it eats too much of our profits when oil prices are high."
So?!?
They're still making billions in profits when oil prices are high and Alaska should reap those benefits as well.
I say, scrap it all. Leave ACES alone. It's working.
Various Tax Rates
Taxes and royalties top 40 percent in the U.S. Gulf of Mexico, 50 percent in Brazil, 70 percent in Norway and 80 percent in Malaysia, according to the Edison report.
Google and read the Edison report.
Calypso
"The Integrated Oil and Gas industry made an average profit of 6.2 cents per dollar of sales, which ranks #114 out of 215 industries by profit margin, and puts oil companies right in the middle of industries by profitability."
Conoco made over 12 billion in net profits for fiscal year 2011... Even with the BP oil spill the company made more than Conoco...
But you know what Lypso, lets just let be nicer to these "poor" oil companies that can't turn a profit....
GET OUTTA TOWN!!!
GJSMITH
Thanks for that article... Pretty much proves my point...
@smith - so and your point
@smith - so and your point is?
Where is it reported what percent oil companies pay in "taxes and royalties" in Alaska?
@eddie, seattlepi? Really, is that where you get all your wonderful, enlightened talking points. No wonder you can't put a cogent thought together.
Nuts
During the Battle of the Bulge in WWII, the garrison commander of Bastogne was completely surrounded. The Germans sent a delegation under white flag asking him if he wanted to surrender. He sent a one word answer, "Nuts".
The oilies are in a full court press in the Senate. The Senate knows that Parnell redistricting means a whole new ballgame next year. They are doing the best they can to hold off the onslaught of oily money trying to buy lower taxes.
Parnell, Chenault, and the oil alliance deserve a one word answer. Nuts! It is our oil. Giving away billions for pennies in campaign contributions is nuts.
Nuts indeed
And make sure we send that message to every leggie as well. If they want to sell us out to the oilys, we remove them from Parnell's team of yes-men (and yes-women). Here in Juneau that means Cathy Munoz.
good article-read it
GJSmith has an excellent article bookmarked. Big oil is laughing all the way to the bank.
..They withheld access to our
..They withheld access to our gas at Pt. Thomson for thirty years, depriving this state and the people the benefits that many knew were available if we could use our own gas. The lack of that gas, culminated in the current energy crisis here now. It was waiting to happen. Just a matter of time. And it affects all Alaskans now, where as before it was sloughed off in the urban centers as a minor fluctuation in price as usual. Only this time the price of gasoline and energy in general didn`t go back down. The worst thing we can do here is divide rural and urban, native, non native. Energy is like a disease that doesn`t care about the color of your skin or what your political views are. We all travel and have to eat in Alaska. We gave enough of our fair fiscal value away under ELF and PPT to the tune of about 60 billion dollars, that we DON'T have working for us all those years in the Permanent fund. We should not be talking about giving away several billions of dollars without good reasons why. Senator Stedman hasn`t demonstrated why we start off wanting to give them twenty billion over ten years, without anything in writing to increase oil and or gas production as the Governor has stated he can do?? What the governor failed to tell us was that he meant FEDERAL oil, not state oil. More smoke and mirrors, and certainly a misrepresentation of the Governors real expectations about where "new" oil that was supposed to pay back Alaska for this two billion per year give-way, was going to come from. The Governor gave us all the impression it would be jobs and "fiscal" return from filling TAPS that would result from acceptance of the terms of HB110. We get no taxes or royalties from federal or federal offshore oil. And that`s the only place Mr. Kevin Banks testified before the US congress that we`re ever getting to a million barrels through the TAPS line again. I understand it is only structurally rated at 1.1 mbpd or even less, because of the age and condition of the pipe. To me, that adds up to Shell`s 700,000 FEDERAL barrels-a-day from the Chukchi, filling TAPS to it`s engineering limit. So Senator Stedman, they make 122% internal-rate-of-return, why are we giving away TWO BILLION A YEAR of our fair share of our resource value to Exxon, BP, and Conoco, for doing what they are supposed to do anyway? in competition of those same projects the governor says we`ll bring that oil from! Are they not competitors? Apparently not if the Prudhoe "unit" can "strand", or "warehouse" our gas, denying us access, at the same time keeping gas and diesel in high demand at too high a cost to this state. Natural gas will end that scam but quick. The shame is we have waited so long to finally take action on our own behalf, past the 2002 effort by the voters of Alaska, that created ANGDA to get that same gas. Ten years ago. We heard crickets from the cartel on the slope all that time too. Their arrogance knows no ethical bounds, nor does their greed. Just how I see it.