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Oil tax testimony in Capitol

Most speakers critical of Gov's plan in Thursday Senate hearing

Posted: January 31, 2013 - 9:56pm  |  Updated: February 1, 2013 - 1:08am

Testimony on Republican Gov. Sean Parnell’s oil production tax reform bill Thursday, as heard by the Senate Special Committee on Trans-Alaska Pipeline System Throughput, was overwhelmingly against the proposal, with many members of the public saying they believe the envisioned changes to the ACES tax regime will benefit major oil companies at Alaskans’ expense.

Testimony Thursday was open to residents of Southeast Alaska, as well as coastal communities on the Kenai Peninsula, Kodiak Island, Prince William Sound and the Bering Sea. A couple of Anchorage residents also testified.

Parnell’s Senate Bill 21 and its House counterpart, House Bill 72, would keep the base production tax rate at 25 percent while eliminating progressivity from the rate, restructuring tax credits and instituting a gross revenue exclusion on 20 percent of new oil.

The proposal is opposed by Democrats in the House and Senate minority caucuses, who call it a “giveaway” to big oil companies and insist that any production tax cut should require companies to invest more in Alaska oilfield development. The Alaska Oil and Gas Association has also criticized the proposal, warning that it could act as a tax increase when oil prices are low, while supporting many of its provisions.

Parnell and many Republican legislators have argued that reform is needed to reverse a decline in the amount of oil flowing through the pipeline. This is Parnell’s third attempt to lower production taxes, which he says will spur the new oil production that Alaska needs to see.

Tony Tengs of Juneau was the first person to testify Thursday. He quoted from Parnell’s Jan. 16 State of the State address, a passage in which Parnell emphasized Alaska’s large budget reserve and general prosperity, and then offered a rejoinder.

“It’s true, and a lot of it’s due to the benefits of ACES and the revenue we get from that,” Tengs said.

Tengs also noted Parnell’s professional history working for oil companies. Before entering politics, Parnell was employed by ConocoPhillips and later worked at the law firm Patton Boggs, which represented ExxonMobil.

“He did work for the oil companies, and it’s hard to separate out,” said Tengs. “That needs to be recognized … given the fact he’s trying to get them a better percentage for their benefit.”

Monika Kunat, a student at the University of Alaska Southeast, said she is “Alaska’s future” before criticizing Parnell’s bill, claiming it “gives no incentive” for oil companies to increase in-state production.

“Please be careful with my future and the future of Alaskans,” Kunat told the committee.

Cordova resident David Otness also testified against the proposal, suggesting oil companies are trying to pad their profit margins in Alaska.

“It is not in our best interests to be a subservient partner in this relationship,” Otness said. “This is our oil, our one-time gift.”

That argument was echoed by Eric Treider of Kenai.

“The oil is the people’s resource, and because it’s the people’s resource, I believe in the concept of progressivity,” said Treider.

While Tengs, Otness and many others who testified praised ACES, Kodiak Borough Assembly Member Aaron Griffin suggested the regime must change — but he said he wants the production tax rate to be higher than Parnell is proposing.

“S.B. 21 may be one way to address production … but dropping the tax rate to 25 percent is much too low,” said Griffin, who emphasized he was only speaking for himself Thursday evening.

A few who testified Thursday spoke in favor of Parnell’s approach to oil tax reform.

Juneau resident Richard Jacob Maenpa attributed the production decline on the North Slope to Alaska’s tax regime.

“I think the problem is our tax policy,” Maenpa said. “I believe it’s unbalanced. I think it makes it unattractive for the oil companies to come here and work.”

Rachael Petro, president and chief executive officer of the Alaska State Chamber of Commerce, also suggested the current system needs to be reformed.

While Petro said the Chamber is still reviewing S.B. 21, she said, “We absolutely support the guiding principles the governor has outlined for an oil tax bill.”

Petro argued that even if an oil tax cut costs the state money, it may be a necessary expenditure to spur increased production.

“Making and keeping Alaska competitive nationally and globally is simply an investment in Alaska’s long-term sustainability,” Petro said.

Thursday’s session was a sequel to Tuesday’s committee meeting, at which comments from Anchorage, Matanuska-Susitna Valley and Interior residents, among others, were heard.

Comments Tuesday were mixed, with many industry representatives who showed up to testify in person voicing support for Parnell’s S.B. 21 and testimony given by phone from remote locations around the state being more split.

Editor's note: An earlier version of this article misstated Gov. Parnell's work with Patton Boggs. He was employed by the firm while it represented ExxonMobil, but according to his office, he did not do work on ExxonMobil's behalf.

• Contact reporter Mark D. Miller at 586-1821 or at mark.d.miller@juneauempire.com.

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