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Southeast legislators explain their oil tax votes

Muñoz flips to 'yea' on reconsideration

Posted: April 14, 2013 - 9:34pm  |  Updated: April 15, 2013 - 12:03am
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7/2/2001 The trans-Alaska pipeline starts just outside the gates of Pump Station 1 in the Prudhoe Bay oil field.  Michael Penn / Juneau Empire
Michael Penn / Juneau Empire
7/2/2001 The trans-Alaska pipeline starts just outside the gates of Pump Station 1 in the Prudhoe Bay oil field.

Southeast Alaska’s legislators split their votes on the final version of Republican Gov. Sean Parnell’s Senate Bill 21, the oil tax overhaul that passed the Legislature Sunday and is poised to become law.

In the case of Rep. Cathy Muñoz, R-Juneau, that vote-splitting is especially true.

Muñoz broke with her party to vote against S.B. 21 in an early-morning session, after supporting several unsuccessful amendments offered earlier to change parts of the bill.

But on a reconsideration vote, considered the final vote on passage, Muñoz was one of three lawmakers — all of them Republicans — to change their votes from “nay” to “yea.”

After seeing the amendments she supported fail, Muñoz said she was “pretty resolved to vote ‘no’ against the bill.”

“And then I voted, and as soon as I voted, then, you know, I was struck by just how enormous the problem that we face is with the decline of oil production,” said Muñoz. When a reconsideration vote was called, she continued, “At that moment, I voted ‘yes,’ recognizing that we’ve got a serious problem. Does this bill get the result that we need? I’m not sure of that. And that’s why I voted ‘no’ on the first vote.”

Muñoz explained, “The first vote, that’s determining whether the bill moves forward or not. I was not ready to move it forward because I think it needed more work. After the vote, you know, after it passed, then I voted ‘yes’ as a message saying that this is a problem. We have a fiscal problem in this state, and we need to do something. We can’t do nothing.”

S.B. 21 reduces state oil production taxes — a gambit that critics have derided as a “giveaway,” but which supporters have said is a necessary “investment” to attract more investment and production on the North Slope amidst a decades-long decline.

Juneau’s other representative, House Minority Leader Beth Kerttula, was clearly unhappy about the outcome of the vote Sunday. Together with the rest of her minority Democratic caucus, and joined by three of the four House Democrats who caucus with the majority, Kerttula voted against S.B. 21 on both votes. She also co-sponsored a number of unsuccessful amendments to the bill.

“That was a terrible thing to have had happen,” said Kerttula of the House’s approval of the bill. “I mean, the Legislature was basically giving control of our oil and gas revenues for the future without one piece of commitment, one shred of a commitment to this state. (It) is a horrifying situation to be in right now, and I’m very worried about what happens to the future of our oil revenues at this point.”

Rep. Peggy Wilson, R-Wrangell, joined Muñoz in defecting to back certain amendments during the leadup to the final vote.

But on both the first vote on passage and the reconsideration vote, Wilson voted with the majority to support S.B. 21.

“We knew we had to do something,” Wilson said. “We wanted to be at least midpoint in … being competitive worldwide. And we wanted to move to the left a little bit so that we’d be more competitive. And I think we’ve accomplished that.”

Wilson admitted she does not know if the “balance” S.B. 21 strikes between the amount the government taxes and the margin of profit for oil producers is the right one, suggesting that time will tell.

“I think we did a lot that we set out to accomplish,” said Wilson. “It’s very hard to draw the balance. The balance is such a fine line. Whether we found that line or not remains to be seen. We might have to do something later on, but that’s several years down the line if this doesn’t work. But if it does, I think we can leave it just like it is. But that all remains to be seen. We won’t really know until later on.”

Southeast’s most junior representative, Sitka Democratic Rep. Jonathan Kreiss-Tomkins, was a “nay” vote on S.B. 21. Like Kerttula, he was part of the group of nine Democratic representatives that jointly offered futile amendments to revise the bill on the House floor.

“It’s a tragedy for Alaska,” Kreiss-Tomkins said of the bill’s passage. “Basically, on the basis of trust, and trust alone, we gave the oil industry $4.5 billion based on some unsubstantiated notion that they will increase production.”

Kreiss-Tomkins said he reached the $4.5 billion figure by adding up the fiscal impact, as estimated by the Alaska Department of Revenue in a fiscal note attached to the bill, by year together until 2020 after S.B. 21 becomes law.

To reach $4.51 billion, from which Kreiss-Tomkins’ number was rounded, one must assume the maximum fiscal impact predicted for each year without taking into account any new production that may come online.

The Senate voted Sunday afternoon to concur with the changes that the House of Representatives approved to S.B. 21.

As they had when the Senate considered a previous version of the bill, both of Southeast’s senators voted “nay.”

“I thought it was much better, but you know, as was said by a couple of people, it could have been made better,” said Sen. Dennis Egan, D-Juneau. “It’s still too much, as far as I’m concerned, industry-driven.”

Egan said he felt the people invited to testify were skewed in favor of the oil industry and that some dissenting voices had not been heard.

“I think it’s an improvement over what we did,” Egan added. “I wish we would have still had progressivity in there. Of course, it’s down the toilet.”

Progressivity is the mechanism in the current oil production tax regime that provides for the state take in taxes to increase as oil prices rise.

Sen. Bert Stedman, R-Sitka, has maintained for years that the degree of progressivity in ACES is too high.

But Stedman used much of the same language that minority Democrats had in describing S.B. 21, which has an immediate fiscal impact of $670 million to $720 million over the next fiscal year.

“The tax structure in ACES is too rich … especially north of $120 (per barrel),” Stedman said. “So ACES needs to be fixed. There’s problems with it. But you’ve got to separate that issue out. ACES is problematic — high progressivity, big credits, two of the major problems in ACES. But that doesn’t mean you give away the cash flow in your legacy fields, in already economic areas, and then to try to incentivize non-economic development. That doesn’t work.”

• Contact reporter Mark D. Miller at 586-1821 or at mark.d.miller@juneauempire.com.

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