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Floor of Alaska Senate breaks out into oil tax debate

Posted: February 11, 2014 - 12:02am

JUNEAU — The floor of the Alaska Senate broke into an impromptu debate over oil taxes Monday.

Sen. Cathy Giessel sparked the discussion in a special order, which is when members speak on issues of their own choosing. Hers was entitled “What Could It Look Like?”

Giessel, R-Anchorage, and chair of the Senate Resources Committee, spoke of the need for a healthy oil industry for Alaska’s economy and what alternatives Alaska had for comparable tax revenues. They included having tens of thousands of cruise ships visit Alaska, every Alaskan of drinking age down 138 shots a day and every Alaskan of age smoke 10 packs of cigarette a day. She said those aren’t things the state would want to do.

Giessel said there is new activity on the North Slope under the rewrite of Alaska’s oil production tax, which the Legislature passed last year. The state is better protected at lower oil prices under the new law and the new system would yield more revenues if prices continued to fall than under the former tax structure, she said.

She is much happier to see the activity on Point Thomson and additional rigs on the North Slope than the alternative, Giessel said.

Sens. Hollis French and Bill Wielechowski offered rebuttals.

French, the Senate minority leader, in a speech he entitled “Another Idea,” said the state also could “undo that bad tax idea and put a fair oil tax back on the books.”

Alaska under the new system will never capture windfall profits when oil taxes spike as the state did under the old system, he said.

A referendum on the tax law is scheduled for the August primary ballot. French said Alaskans can go to the polls and vote to fix the tax, allowing lawmakers to work on putting a fair tax on the books.

Wielechowski, D-Anchorage, in his remarks, entitled “Where’s the Production?” said Gov. Sean Parnell “promised us, told us” there would be more production — including 1 million barrels of oil — if the oil-tax change was passed. But he said forecasts call for continued production declines. He called the bill “a complete and utter failure.”

Parnell, when he began seeking an overhaul in the oil-tax structure several years ago, set a goal of 1 million barrels of oil a day through the trans-Alaska pipeline system in a decade. The Department of Natural Resources in 2012 said that during that period, the target could include sources like development of smaller pools of conventional oil, production from shale and heavy oil plays and production from the Arctic National Wildlife Refuge, which state officials have been pushing to have opened to drilling. The refuge remains off limits to drilling, however.

During the tax debate last year, oil company officials said they believed the tax cut would lead to more production, but it wasn’t clear just how much more and when the increased production would happen.

People on both sides of the tax debate have at different times sought to use the tax structure as at least part of the reason for the long-term trend of declining production. It happened during the push to change taxes in 2011 and 2012 — which ultimately culminated in the passage of the new system last year — and is being used by opponents of the new tax structure, who say the state’s lower revenues are just the start of problems if the tax stands. The current fiscal year was divided between the old tax structure and the new one.

In an interview, Wiele-chowski said the tax structure actually has “very little” impact on production and that there are other steps the state can take to encourage new investment. He said Democrats are considering rolling out a new proposal this session that would offer Alaskans a view of what a new tax structure might look like, if the referendum to repeal the current one is successful.

Parnell spokeswoman Sharon Leighow said by email Friday that Parnell’s goal included production from the Arctic National Wildlife Refuge, portions of the National Petroleum Reserve-Alaska and offshore. Shell recently announced it was halting operations off Alaska’s Arctic shores this year and possibly withdrawing for good, in part after an adverse court decision.

“However,” Leighow said, “we remain very optimistic for Alaska’s oil future, especially with the billions of dollars in new investment we’ve seen already.”

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William DeRhode
William DeRhode 02/11/14 - 11:20 am
Vote YES in August to repeal SB21!

We Alaskans need to take our future back from the oil companies! Please vote YES in August to repeal SB21.

If the biggest contributors on the other side of the campaign are the oil companies, then you KNOW it needs to be repealed.

John McDowell
John McDowell 02/11/14 - 12:37 pm
debate like Micciche`s "throughput committee" had?

"Floor of Alaska Senate breaks out into oil tax debate".... as darn well they should. Isn`t that why we pay them?? to cogitate and listen and watch and make a decision?
We have to end the back-room industry-cozy deals that come to our legislators in a "take it or leave it" mode,.. which is exactly what happened here. Same as SB21. The effort will be made to "Railroad" this legislation through like a greased pig.... and we won`t see any more of it for years, as we haven`t seen squat from Micciche`s "TAPS throughput committee". It was a charade and he knows it. He was pretty red-faced in press availability today when asked by the press to give a committee update. A lot of belly laughs could be heard from the room packed with the press.

Judy Hodel
Judy Hodel 02/11/14 - 03:57 pm
Outside Hires

So we give the oil industry HUGE tax breaks and they said they'd increase employment as well as produce more. But now we find that employment is largely to nonresidents and that the amount of increased payroll paled in comparison to the tax breaks granted. Hmmm. We can fix this in August.

Earl Richards
Earl Richards 02/12/14 - 05:28 am
No Free Tax Giveaways

Alaska does not have a healthy oil industry, because the independents and the small Alaska oil companies are squeezed-out by the Big Three from doing business, from operating on the North Slope and from using TAPS. I doubt very much if the oil price would drop. The oil corporation officials are wrong, a tax cut will not increase oil production, only an increase in oil markets and oil demand will increase oil production. Oil production is a function of demand and not taxes.

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