Legislators from Southeast Alaska reacted cautiously Monday to minority Democrats’ introduction of an oil production tax reform proposal competing with Republican Gov. Sean Parnell’s legislation, with most saying they have yet to read and form an opinion on the plan.
Democrats introduced bills in the House of Representatives and Senate Monday morning that they said provide an “alternative” to Parnell’s proposal. No cosponsors from the majority caucus in either chamber have signed on yet.
The Democratic proposal would, like Parnell’s bill, provide for a gross revenue exclusion on 20 percent of new oil, which Democrats would limit to oil from new fields on the North Slope for the first seven years of production.
Producers could also get a 10 percent gross revenue exclusion for heavy oil production, new areas in legacy fields, or barrels of oil exceeding the amount they produced last year.
“The bottom line is this,” said Rep. Les Gara, D-Anchorage, during a joint House and Senate minority press conference Monday. “If you develop in Alaska, if you produce more oil in Alaska, we’ll give you a reasonable tax break. If you want a $2 billion check to take to Libya or Iraq, you’re not getting that from our bill. You have to produce to get a reduction.”
Gara added toward the end of the press conference, “The governor keeps talking about how he wants to fill the pipe. Well, this is the way to do it.”
The Democratic proposal includes several other provisions as well, including a requirement that companies seeking to lease state land for oil exploration submit development plans to the state, as well as an option for smaller would-be producers to get prime, low-interest loans from the state to build new processing facilities.
Parnell has said his proposal, which would end the progressive element of the production tax to leave a base rate of 25 percent, remove or restructure certain tax credits and provide a gross revenue exclusion on 20 percent of new oil, would protect the state when oil prices are low while giving up more at higher prices.
While Parnell has said reform like what he has proposed is needed to entice oil companies to produce more oil in Alaska, Democrats have attacked his proposal as a “giveaway.”
Senate Minority Leader Johnny Ellis, D-Anchorage, said Monday, “The governor’s proposal to completely eliminate progressivity … would be foolish, because it would shortchange Alaskans by billions of dollars.”
Sen. Bert Stedman, R-Sitka, has been among the most vocal senators in the majority advocating for a more moderate progressive tax, a position at odds with Parnell’s proposal to eliminate progressivity altogether as well as with minority Democrats’ defense of the current rate of progressivity.
Stedman said Monday afternoon that he had not yet reviewed the Democratic bill, but he had seen part of the press conference and found a couple of points on which he and the Democrats agree, such as the gross revenue exclusion for new oil.
“It’s a legitimate tool to increase the rates of return of areas that are challenged, like heavy oil or areas outside of the existing fields,” Stedman said.
Stedman said he is unsure whether he would sign onto the Democratic proposal once he looks at it, but he said the minority’s suggestions may carry some weight.
“I wouldn’t dismiss the Democratic bill in the entirety because it’s coming from the minority,” said Stedman, “They will, I’m sure, have support planks buried within the bill.”
Southeast Alaska’s other senator, Sen. Dennis Egan, D-Juneau, said he thinks both caucuses in the Senate are making good faith efforts to move forward on oil tax reform.
“I think that there’s a willingness to listen and try to work together on this thing,” said Egan, who caucuses with the Republican-led majority and is not a cosponsor of the bill, which he said he had not read yet. “I think both sides are open. I don’t think it’s just pontificating stuff, I think … both sides are really trying to resolve differences. And I just hope they can do it.”
House Minority Leader Beth Kerttula, D-Juneau, is the prime sponsor of House Bill 111, the Democratic proposal’s House incarnation. She was out of town Monday dealing with a family emergency, but she summarized her bill’s goals in a short email late Monday afternoon.
“Our bill is a tax reduction for production, not promises,” Kerttula wrote. “It’s based on three things, getting oil into the pipeline, being sure Alaskans benefit as well as the oil companies, and encouraging competition. By targeting new fields, new oil and new production we focus on exactly what Alaska needs for a strong future.”
Southeast’s newest legislator, Rep. Jonathan Kreiss-Tomkins, D-Sitka, has not signed on as a cosponsor of H.B. 111. He said he is taking time to review the bill and get up to speed on its provisions, but he favors many of its ideas.
“I’m still learning the bill, but I like the underlying principles that I’ve learned about so far,” Kreiss-Tomkins said. “Namely, if oil companies produce more, they pay less in taxes.”
Kreiss-Tomkins added, “The governor’s bill isn’t oriented around production, whereas this bill is almost solely focused on increased production.”
Egan said he did not want to comment on the Democratic legislation, which is before the Senate as Senate Bill 50, without reading it first, but he outlined his own position on reducing the state’s oil taxes.
“My big thing was … I want to make darn sure that we get something in return,” Egan said. “And there are others, some majority legislators, who are concerned.”
Rep. Cathy Muñoz, R-Juneau, also put herself into the same camp as Stedman and other majority senators who have called for a more moderate progressivity.
“Clearly, ACES goes too far,” said Muñoz, “The government take under ACES is too steep. So there’s an opportunity, I think, to find a balance between what the governor is proposing and possibly what the Democrat proposal is, although I have not read the specifics of it.”
Muñoz sits on the House Finance Committee, which will hear Parnell’s bill after the House Resources Committee reviews it.
Southeast’s sixth legislator, Rep. Peggy Wilson, R-Wrangell, was not available for comment Monday, according to her staff. She sits on the House Resources Committee, which heard Parnell’s proposal Monday for the first time.
Parnell’s office also responded Monday to the Democratic proposal, with press secretary Sharon Leighow providing the governor’s assessment via email.
“We are pleased they agree there is a problem with production under the current system,” Leighow wrote of the Democrats. “After a cursory look at their proposal, the governor is concerned it simply nibbles at the edges of the problem, while leaving Alaska’s treasury at risk and accepting the status quo production decline. We will review the legislation more closely and measure it against our four guiding principles.”
Parnell has set out “four guiding principles” to which he has referred in virtually every public appearance he has made in which he has commented on the oil tax issue. He has said he will consider proposals that are simple, competitive and “fair to Alaskans” and that would encourage new production, ideals he has said guided the crafting of his own proposal.
• Contact reporter Mark D. Miller at 586-1821 or at firstname.lastname@example.org.