JUNEAU — Opponents of a proposed oil tax overhaul rallied across the state, including on the steps of the state Capitol, Thursday, while a rewritten tax bill advanced in the Alaska House.
Supporters of a tax change say Alaska can’t stand by as production continues to decline. They see lowering taxes as a way to increase production and investment.
Production has been on a downward trend since the late 1980s, but higher prices in recent years have helped to mask the impact of the decline on the state budget. Alaska relies heavily on oil revenues to run.
Critics call the tax plan a dangerous gamble that amounts to a giveaway of Alaska’s oil wealth.
“Stop the Giveaway” rallies, organized by the group Backbone, were held in several communities Thursday, including Juneau, where Democratic legislators addressed the sign-waving crowd and tore up a large, multibillion-dollar fake check to the North Slope’s three major oil companies. Music, including Tom Petty’s “Won’t Back Down,” and Bruce Springsteen’s “The Rising,” blared from loudspeakers.
Senate Minority Leader Johnny Ellis called it a “day of resistance” to an “epically bad rip-off.” Sen. Bill Wielechowski, D-Anchorage, said the people needed to send a message to lawmakers and Gov. Sean Parnell, before leading the crowd in a chant of “It’s our oil.”
This came hours after the House Resources Committee — during a marathon hearing that ended in the early-morning hours — advanced a rewritten tax bill that Democrats say would have the state rely on oil company statements rather than receipts in determining whether expenses qualify for deductions.
“In the cover of night, this bill was made much, much worse,” Wielechowski said.
Parnell said the bill is in line with the guiding principles he set out for any tax change, though he said there are some elements the administration is taking a closer look at, including the billing provision. He reiterated his resolve in pushing to lower taxes, as a way to create more opportunities for Alaskans.
The Make Alaska Competitive Coalition, which supports changing the tax structure, issued a statement Thursday saying Alaskans want a change and voted for it last November. That election resulted in Republicans wresting control of the Senate from a bipartisan coalition that, in 2011, blocked an attempt by Parnell to roll back taxes. The Alaska Support Industry Alliance on Thursday also announced plans to begin running ads urging support of SB21.
Alaska’s current tax structure features a 25 percent base tax rate and a progressive surcharge triggered when a company’s production tax value hits $30 a barrel. The idea behind it was that the state would help companies early on with things like tax credits and share profits later when oil flowed and prices were high.
Companies say the surcharge — credited with helping fatten state coffers in recent years— eats too deeply into their profits when prices are high. Alaska’s Revenue commissioner also has said he’s seen no evidence that tax credits — which could top $1 billion next year — have led to increased production.
The bill that narrowly passed the Senate last month, like the bill proposed by Parnell, eliminated the surcharge and revamped the suite of credits with a goal of gearing the incentives to new production. But the Senate bill set a 35-percent base rate. It 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. That 35/$5 concept was key to the support of some senators, including Peter Micciche, R-Soldotna, who said he hadn’t been able to fully review the House version yet to know if it’s a move in the right direction.
The latest version of the bill features a 33 percent base rate and a $5-per-barrel credit for oil produced. The credit would apply to what would be considered new oil and production that also would qualify for a 20 percent tax break known as a gross value reduction.
Areas that don’t qualify for the gross value reduction — which an administration official has said would likely include the vast majority of Alaska’s legacy fields — would have a 33 percent base rate and a per-barrel allowance on a sliding scale, higher at lower prices, non-existent at higher prices, around $160.
The base rate was lowered after industry representatives complained Tuesday night that 35 percent would be too high. House Resources co-chair Eric Feige noted a proposed amendment to set the base rate at 30 percent failed. He said that shows “we weren’t there doing oil’s business. We were certainly not willing to give away the farm there.”
Going to 33 percent would put Alaska in the range that the consultants said would make it more competitive, he said.
The measure now goes to the House Finance Committee, which will have to grapple with a number of big, unresolved issues — oil taxes, a liquefied natural gas trucking plan and the capital budget — in the waning days of the legislative session.