JUNEAU — A revised fiscal analysis shows a proposed oil tax overhaul could cost the state between $5.4 billion and $5.7 billion through 2019.
That is based on the latest forecast for oil prices and production, released last week, which assumes a continued net decline in production and prices between $109 a barrel and $118 a barrel. Under the prior forecast, the bill crafted in the House Resources Committee would have cost up to $6 billion during that time.
The analyses have been billed as worst-case scenarios, given that the goal of the tax cut is to increase production.
Oil company representatives have said the plan would make Alaska more competitive and should lead to more production, but they have not quantified the increase. It has been suggested that it could take an additional $3 billion to $5 billion a year in investment to eat into or reverse the trend of declining oil.
There have been no budget presentations given in committee on the impact of a tax cut on Alaska’s budget, though Gov. Sean Parnell has proposed a five-year plan that calls for a continual reduction in spending and use of up to $700 million in savings a year to help absorb the short-term hit.
The House Finance Committee is weighing its own version of the bill, with days left in the legislative session.
Supporters say the state needs to do something to address declining production. They say Alaska would be in the same predicament — looking to cut spending and dip into reserves — even if a tax cut weren’t passed. Critics, too, want more oil in the trans-Alaska pipeline but say the current plan is dangerous, with no firm commitments from companies, and gives the companies too much.
“It’s all still hypotheticals,” Rep. Les Gara, D-Anchorage, said of the production scenarios that have been presented.
Parnell has been pushing for a tax cut as a way to increase investment and production, and has issued weekly statements on his tax plan as it has worked its way through the Legislature. In his latest statement Wednesday, Parnell said the proposal “strikes the right balance to ensure all Alaskans benefit over the long haul, no matter the price of oil. We are on the cusp of ensuring a prosperous future for generations of Alaskans.”
Editorials from two of the state’s largest newspapers, the Anchorage Daily News and Fairbanks Daily News-Miner, have come out on opposite sides of the debate.