Republican Gov. Sean Parnell expanded on and defended proposals he outlined in Wednesday night’s State of the State speech in a Thursday morning press conference, his first of the new legislative session.
Parnell said his oil tax reform plan, which he trumpeted in his address before a joint session of the Alaska State Legislature Wednesday as a means of encouraging more oil production in the state, is the only one he has seen that can reverse Alaska’s production decline.
“The current system isn’t fair to Alaskans,” Parnell said. “It’s not fair to Alaskans to be sliding in production and doing nothing about it.”
The centerpiece of Parnell’s plan, introduced Wednesday as House Bill 72, is the elimination of the progressive component of the oil production tax, leaving the base tax rate of 25 percent in place.
But on Thursday, Parnell touted another part of the plan, which would make 20 percent of profits from new oil production tax-exempt. He said that incentivizes new exploration and development.
“To get the maximum benefit of the tax incentives in this bill, there has to be new production,” said Parnell. “Right now, we’re writing checks for tax credits that don’t necessarily lead to new production. And that’s the system being supported by the Democrats.”
Parnell was deeply critical of the Democratic minority caucus, which delivered a joint response from its leaders in the House of Representatives and Senate Wednesday night characterizing his plan as a “giveaway” to big oil companies. He called the characterization “a short-term view” and said he rejects it.
“I was hearing comments from them before they’ve even read the bill, and that’s something that causes me concern,” Parnell said. “Their characterization of the bill is false. There’s no question that this is a totally different and new proposal from last time. There’s also no question that the fiscal impacts are less than the prior bill. But there’s also no question that this is more fair to Alaskans.”
Questioned on some Democratic lawmakers’ contention that the proposal does not guarantee increased production, Parnell intensified his criticism.
“We know that the path they support guarantees production decline,” said Parnell. “The path that I have chosen and led with here is a path that says, ‘We will tax less, and you’ll get the maximum benefit of this tax change if you produce new oil.’”
Some Democratic legislators attended the press conference, including Rep. Les Gara, D-Anchorage, one of Parnell’s most outspoken critics in the Legislature.
After Parnell concluded his remarks, Gara disputed the governor’s suggestion that Democrats are against making changes to the oil production tax system.
“His talk about us supporting the status quo — we never have,” Gara said. “Last year, House Democrats had a bill to tie reasonable tax breaks to new production, but we weren’t going to give money to oil companies who were going to take it out of state and spend it in Libya and Iraq. That’s the difference between us and the governor.”
House Democrats will introduce a bill this session that would lower production taxes on companies in exchange for new oil production in the state, according to Gara.
Gara added, “Just lowering taxes without requiring companies to do something is not a way to make things work.”
• Contact reporter Mark D. Miller at email@example.com.