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All eyes on Senate ahead of expected oil taxation vote

Posted: March 19, 2013 - 12:02am

JUNEAU — Both sides are ratcheting up the rhetoric on oil taxes ahead of this week’s expected vote in the Alaska Senate.

The stakes are huge: Supporters say the current tax structure is out of whack and something needs to be done to address the long-running trend of declining production. They say SB21, which would overhaul Alaska’s oil tax structure, will lead to more investment and production, though the major oil companies have made no promises. Critics call the proposal a massive giveaway to oil companies with no guarantee Alaska will see anything in return.

Interests on both sides of the issue have sent email blasts, urging Alaskans to contact their senators and either ask them to vote yes — to at the very least keep the discussion going — or to “reject this historic giveaway of our resources,” as Senate Minority Leader Johnny Ellis put it. The bill, if it passes, would still have to go to the House.

Ellis, D-Anchorage, said he expects a tight vote. He said he’s asking legislators “to make a vote that squares with their consciences and that squares with the Alaska Constitution, in the best interests of Alaskans.”

Senate President Charlie Huggins believes he has the 11 votes needed in the 20-member chamber for the measure to pass.

“I think in the end, the vote will reflect what the people of Alaska think,” said Sen. Anna Fairclough, R-Eagle River, who said she was leaning toward yes, seeing SB21 as a “way to change the future of Alaska.”

Members of the Senate Finance Committee, which crafted the latest version of the plan, said they were trying to find the balance between making Alaska more competitive — something consultants told them the proposal would do — and protecting the state treasury.

The latest version of SB21 would cost the state about $6.3 billion between fiscal years 2014 and 2019, based on the latest forecast for prices and production. One estimate from an administration consultant says it would take about 90,000 additional barrels of oil a day to offset the projected fiscal impact during that period.

Parnell’s budget director, Karen Rehfeld, said the goal is to increase production, eventually boosting state revenue. The current proposal would result in revenue reductions in the near-term, but she said with budget discipline and careful use of statutory budget reserve funds, the state will be able to continue to provide essential public services.

The reserve fund has about $5 billion. The state is looking at having to dip into it this year to cover an expected shortfall of about $320 million, caused by factors including lower-than-expected oil prices and increased capital spending by oil companies, which can help offset their tax liability.

Gov. Sean Parnell addressed the issue Monday in his weekly message to Alaskans.

“State government does not need more money now, nor does it need higher government spending. What we need is more economic opportunity for Alaskans,” he said, adding that comes through new oil production.

“The next time you hear a legislator talk about how much oil tax reform will ‘cost’ the state, ask them why they would rather protect state government at the expense of every Alaskan’s opportunity,” he said.

Legislative leaders already have been talking about the need to limit spending amid declining oil production, whose impact has been masked by higher prices in recent years. Production has been on a downward trend since 1989, when the trans-Alaska pipeline hit a peak of moving 2.1 million barrels of oil a day. The average this year has been about 575,000 barrels a day.

Critics say legislators need to be slow and deliberative in whatever they do, but supporters of a change to the tax structure said the issue has been studied extensively. It has been a dominant issue in the Legislature since at least 2011, when Parnell proposed what became his first failed attempt to cut oil taxes.

“It’s time to get this done,” said Jim Jensen, co-chair of the Make Alaska Competitive Coalition.

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