Senate poised to begin debate on oil taxes

Senate President Charlie Huggins, R-Wasilla, prepares to start Tuesday's Senate session where the newly worked oil tax bill was introduced. The Senate is to take up debate and amendments on Wednesday.

JUNEAU— The long-awaited debate on the dominant issue this legislative session — overhauling Alaska’s oil tax structure — could finally begin on the Senate floor Wednesday, with majority leaders indicating they have the votes to pass the bill.


Onlookers got an early glimpse of the debate Tuesday, when minority Democrats asked about changes between different versions of the measure. This prompted breaks to allow majority members to share information with minority members or to get information from each other, aides or administration officials sitting in the gallery to respond.

Senate Minority Leader Johnny Ellis said the answers “didn’t inspire a lot of confidence.”

“More vetting, more discussion, more detail will be necessary, I believe, for the public to have any confidence that legislators read the bill and understood the bill and modeled it and did their due diligence,” said Ellis, D-Anchorage.

Senate Majority Leader John Coghill said the plan is to start taking up amendments to SB21 Wednesday, with a vote possible as early as that day. Republican Sens. Kevin Meyer and Peter Micciche, ConocoPhillips employees on leave during the session, asked to be excused from the vote, declaring a potential conflict. Their requests were objected to, meaning they’ll have to vote.

The bill is aimed at encouraging more investment and increasing oil production. Critics say the proposal gives too much to oil companies with no promises the state will see anything in return.

House Minority Leader Beth Kerttula, D-Juneau, said Alaska needs a “vibrant” oil industry, but “this isn’t the way to do it.” Coghill, R-North Pole, said the eventual vote will be “probably career-making or breaking for some people, I would think.”

The Senate has taken the lead on the issue, with the floor debate set to begin with about 3 ¬Ω weeks left in the regular session. Eleven votes are needed for passage, and the vote is expected to be tight. Coghill said the bill wouldn’t be put on the floor if the votes weren’t there for it to pass.

Gov. Sean Parnell said in an interview with The Associated Press that a vote for SB21 is a “vote for Alaska’s future, not for guaranteed decline.”

“It’s about that simple right now,” he said. “This needs to be done. It’s been several years in the making, and I think even some of the detractors would admit that this is a huge step forward and an improvement on any past proposals.”

This is Parnell’s third attempt to cut oil taxes as a way to boost investment. The Senate in 2011 blocked the first attempt, and he pulled the proposal he submitted during special session last year after it was criticized by legislators in both chambers and parties.

SB21, as crafted by the Senate Finance Committee, would increase the base tax rate from the current 25 percent to 35 percent through 2016. The rate would then go to 33 percent. The proposal also included a $5 allowance for each taxable barrel of oil produced and a 20 percent tax break for oil from new fields and new oil from legacy fields.

Sen. Lesil McGuire, R-Anchorage, said she expects an amendment from the majority Wednesday that would fix the base tax rate at 35 percent, in combination with the $5 per barrel allowance, a level that some senators had earlier seemed more comfortable with. Minority members plan to propose a series of amendments, too.

The bill, as it stands, would cost the state up to $6.3 billion between fiscal years 2014 and 2019, based on the latest forecast for prices and production. Parnell said the state will be able to manage its way with savings to absorb the near-term hit, with the expectation that production will increase as a result of the tax break.

The current version was built off proposals put forth by Parnell and the Senate Resources Committee, all of which proposed scrapping the progressive surcharge triggered when a company’s production tax value hits $30 a barrel.

The surcharge has been credited with helping to fatten state coffers in recent years, when oil prices were higher, but companies have complained that it eats too deeply into their profits when oil prices are high, discouraging new investment.

The bill aims to even out the government take across a range of prices. Consultants have said the plan would make Alaska more competitive for investment dollars, but representatives of the North Slope’s three major players have offered no commitments.


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