JUNEAU — The Senate Finance Committee released a new oil tax plan Thursday, one day after members expressed shock at how much the prior bill would cost the state.
The latest version of SB21 indicates the state would lose $775 million to $875 million next fiscal year, based upon the Department of Revenue’s fall forecast of oil taxes and production. The forecast predicted a continued net decline in North Slope oil — the state’s economic lifeline — through 2022, and prices ranging between $109 and $118 a barrel through 2019.
The fiscal analysis for the prior version of the bill indicated a negative fiscal impact, a mix of the effect on revenue and the operating budget, of between $1.1 billion and about $1.3 billion next fiscal year.
Members of Senate Finance say they are trying to find the balance between making Alaska a more competitive place for new investment — a stated goal of the current effort — and protecting the state treasury.
The version released Thursday would, among other things, increase the base tax rate from the current 25 percent to 35 percent through 2016. The next year, the rate would go to 33 percent. The proposal also includes a $5 allowance for each taxable barrel of oil produced and a 20 percent tax break, known as a gross revenue exclusion, for oil from new fields and new oil from legacy fields.
The earlier version from the panel set the base tax rate at 30 percent. It also put a 10-year time limit on the gross revenue exclusion, which is not included in the new bill.
The latest proposal, like the others, would eliminate the progressive surcharge triggered when a company’s production tax value hits $30 a barrel, something critics see as a giveaway to oil companies. The surcharge has been credited with helping to fatten state coffers, but companies say it eats too deeply into their profits when oil prices are high, discouraging new investment.
Consultants have told the committee that changes being considered would make Alaska more competitive. Industry representatives declined an invitation to testify Wednesday, but received a more direct request to appear Thursday evening, said. Rep. Anna Fairclough, R-Eagle River.
Fairclough said there is fear in moving any money across the table, but she said those contemplating that are doing so out of a love for Alaska, and a desire to spur more production.
Co-chair Kevin Meyer said there’s a certain amount of risk in making a change, because it will mean less revenue in the short run. “But in my mind, to do nothing is much worse than to take this risk in hopes of getting something, which is a better future for Alaska,” he said.
Sen. Bert Stedman, R-Sitka, and a leader of Senate efforts to overhaul the tax structure last year, said the bill is an improvement over the prior version, which he said left a lot of people pale-faced. But he said he remains concerned that more money than necessary would be given over to the companies. He said he’s also concerned with the speed with which the bill has moved.
Asked if there was pressure within the Republican-led majority to support a bill, he said it’s easier for the more seasoned legislators to resist.
Democrats say attempts to define new oil in legacy fields could get messy, a task that would be left to the Department of Natural Resources. House Democratic Leader Beth Kerttula called it “lazy law to punt the tough decisions to agencies to decide what is actually new oil.”
Sen. Bill Wielechowski, D-Anchorage, said he supports the higher tax rate proposed under the latest bill but still couldn’t support the package, calling it a “massive giveaway.”
If the bill advances from committee Thursday, the plan is to begin debating the bill on the Senate floor Monday, Senate Majority Leader John Coghill said.
If the bill were not to pass on the floor, it could get sent back to committee, which might mean a special session, Coghill said.