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State senators delay vote on oil tax bill

Posted: April 12, 2012 - 11:05pm

JUNEAU — The Alaska Senate version of an oil tax bill did not come up for a floor vote as planned Thursday, after members of the Senate majority failed to garner the votes necessary to pass the measure.

Senate Finance Committee co-chairman Bert Stedman said work would continue on the bill. And Senate President Gary Stevens said it’s “entirely possible” an agreement could still be reached by the Legislature’s scheduled adjournment date of Sunday.

The development followed closed-door meetings among members of the bipartisan majority Thursday that pushed back the start of the scheduled 11 a.m. floor session. It was a sharp reversal of the confidence Stedman expressed Wednesday night that the bill had sufficient support to pass. After all, in the committee report, six of the panel’s members recommended a “do pass;” the seventh, Sen. Lesil McGuire, R-Anchorage, recommended amend.

“Today isn’t last night,” Stedman said, after emerging from Stevens’ office Thursday afternoon.

The Senate Finance Committee late Wednesday advanced a bill that represents a structural shift in Alaska’s oil tax system. The bill retains the current base tax rate of 25 percent but scraps the current progressive surcharge triggered when a company’s production tax value hits $30 a barrel. That’s been a main complaint of the industry, especially at high oil prices.

The bill calls for a progressive severance tax that would be levied on gross production after royalties and solely on oil, thereby decoupling oil and gas for tax purposes and addressing the current drag on revenues when oil prices are high relative to gas.

It also calls for lower taxes for production in new fields for 10 years and would reward producers in legacy fields for maintaining production above a decline curve.

The executive director of the Alaska Oil and Gas Association, Kara Moriarty, urged senators to vote “no” on the bill, SB192, saying it wouldn’t lead to the kind of investment the state wants to boost oil production and would be a tax increase for some oil producers.

“It is better for the Legislature to pass something meaningful, versus an incremental step,” Moriarty said in a statement. “At this point in the session, it is better for the Senate not to pass a bill providing such little change.”

Gov. Sean Parnell’s spokeswoman, Sharon Leighow, agreed with Moriarty’s assessment that the bill didn’t go far enough. “Alaska not only needs new investment but also requires reinvestment into our existing producing North Slope fields,” she said in an email. “SB192 does not balance these needs.”

Parnell said Wednesday that he would call lawmakers into special session if the Senate passed an oil tax bill by Sunday to ensure the House has time to review the bill. He said he’d need to consider whether a special session to address oil taxes was needed if the Senate failed to pass a bill.

The goal of the tax debate is to boost now-flagging production. Alaska relies heavily on oil revenues to run.

The challenge on the Senate side has been crafting a bill capable of garnering widespread support in the 16-member caucus. Stevens noted earlier this week that the caucus is wide in its beliefs. He said the bill needs 11 votes to pass, and that those need to come from the majority.

On Thursday, he said the decision to take the bill off the calendar and kick it to the Senate Rules Committee came down simply to numbers.

When some lawmakers emerged from the Thursday morning caucus, several had serious or blank looks on their faces. Sen. Linda Menard, upon leaving, said her stomach hurt. The Wasilla Republican allowed little when asked what she meant by that, except to say she’s a person who likes harmony in life.

“I just so appreciate what hard workers are in that bipartisan working group,” she said, “and I’ll just leave it at that.”

Other senators were also tight-lipped.

Before the morning caucus, Sen. Bill Wielechowski, D-Anchorage, said he had stayed up late trying to understand the bill. Wielechowski, who has been among the Legislature’s staunchest supporters of the current tax structure, said there were some positives with going the proposed route.

But he said he wanted to better understand the decline-curve piece and fully grasp the fiscal implications of the bill.

Later in the day, Wielechowski said he had concerns with the decline-curve provision and couldn’t say how he would have voted on the bill had it come up. He noted that some possible amendments were discussed.

Wielechowski said he is among those who believe the current tax structure is a good one, and working well, and that it’s not critical to pass an oil tax bill just to pass one.

If changes are made, Wielechowski said he wants to ensure the state isn’t “giving away the farm” to oil companies.

Sen. Tom Wagoner, R-Kenai, said the current version of SB192 does too little to encourage additional production. He would have been a “no” vote.

Stevens said if an agreement is eventually reached, the Senate will move a bill to the floor quickly.

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