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Minority Democrats unveil oil tax plan

Posted: February 25, 2014 - 12:04am
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Rep. Les Gara, D-Anchorage, introduces an oil tax proposal to replace last year's oil tax bill (SB21) at a press conference at the Capitol on Monday. Rep. Gara appeared with Sen. Bill Wielechowski, D-Anchorage, and Senate Democratic Leader Sen. Hollis French, D-Anchorage.  Michael Penn | Juneau Empire
Michael Penn | Juneau Empire
Rep. Les Gara, D-Anchorage, introduces an oil tax proposal to replace last year's oil tax bill (SB21) at a press conference at the Capitol on Monday. Rep. Gara appeared with Sen. Bill Wielechowski, D-Anchorage, and Senate Democratic Leader Sen. Hollis French, D-Anchorage.

JUNEAU — Minority Democrats in the Legislature on Monday unveiled their vision of an oil tax system should voters this summer roll back the tax structure lawmakers approved last year.

It’s similar to a proposal aimed at increasing production that they put forth last year as an alternative to the plan pushed by Gov. Sean Parnell that ultimately passed. Democrats say their plan also is aimed at ensuring Alaska gets its “fair share” for its oil.

Senate Minority Leader Hollis French, D-Anchorage, called the Democrats’ plan a fair alternative. “Or, as we say, there’s a better way than the giveaway,” he said.

The Democrats’ proposal would, among other things, provide time-limited tax breaks for oil from newer fields and new developments in legacy fields. It would provide tax breaks for future production of heavy oil and for future production in legacy fields over 2012 levels. It also would require minimum work commitments as part of lease terms and allow the Alaska Industrial Development and Export Authority to issue loans to build or improve North Slope oil processing facilities and other infrastructure.

Voters in August will decide whether to keep or repeal the oil tax structure passed by lawmakers in 2013. If the referendum is successful, the system will revert to what was in place before the change.

The Democrats’ proposal builds off the old system, known as Alaska’s Clear and Equitable Share, or ACES. That system featured a 25 percent base tax rate and a progressive surcharge triggered when a company’s production tax value hit $30 a barrel, which industry representatives said ate too deeply into profits, discouraging new investment. The surcharge also was credited with helping fatten the state’s coffers when prices climbed in recent years.

The Democrats’ proposal — Senate Bill 202 and House Bill 338, in their respective chambers — would reduce progressivity at higher prices and cap it at a price of about $192.50 a barrel under current estimates, according to a fact sheet.

The law passed last year took an entirely different approach to oil taxes. It has a 35 percent base tax rate and tax breaks for what would be considered new oil and production. For legacy fields, there is a sliding-scale per-barrel credit that is higher at lower prices and decreases to zero at higher prices.

Willis Lyford is a spokesman for the Vote No on 1 campaign, which opposes the referendum.

He said in a statement that the Democrats’ measure should not be viewed as a serious policy proposal because they are advocating something different than the old system that they have urged voters to support.

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Art Petersen
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Art Petersen 02/25/14 - 08:32 am
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Good Work!

Is it perfect? Probably not. But is it a good start at an equitable adjustment of ACES? Surely so. Repeal of SB 21 will get the ball rolling toward equity.

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