Dems tout oil-tax restructure

Posted: Wednesday, January 12, 2005

Claiming Alaska's oil production tax is outdated and irrational, five Democratic lawmakers filed legislation Monday to allow the state's share of oil profits to rise and fall with the price of oil.

The state's share in oil production tax income has fallen significantly in recent years, and the Democrats, led by Anchorage Rep. Les Gara and Sen. Hollis French, said Monday that the gap between oil company profits and state tax revenue is widening. Recent estimates showed the gap exceeded $1 million last year and could reach $2.3 billion this year, if oil prices are maintained.

"It's time to look at getting a fair share for Alaskans," said French, while introducing the so-called Alaska Fair Share Bill on Monday morning at a press conference in Juneau. Similar legislation was filed by Democrats in February 2004, but it didn't make it to a committee hearing.

Joint Legislative Budget and Audit Committee Co-Chairman Ralph Samuels, R-Anchorage, said he wouldn't discount the bill at this time.

"We obviously don't want to leave money on the table," he said.

But Samuels said he has some concerns about how increasing the government's take could put a chill on new investments in oil production.

"What is (the legislation) going to do to the production side?" he said. "Production continues to decline ... below 1 million barrels."

Samuels said some answers to that question might be found in a confidential industrial report that will soon be analyzed by Alaska legislators. The House Budget and Audit Committee paid $50,000 to look at how much it costs to produce oil in different countries and how much those countries reap in tax revenue.

A previous version of the report, published by British consulting firm Wood Mackenzie, found that Alaska was one of the most expensive places in the world to drill in 2002, said Judy Brady, executive director of the Alaska Oil and Gas Association.

The report also shows that Alaska ranks 36th out of 60 countries for its share in oil profits, Brady said.

"When oil prices are higher, the state has less of a take and the federal government has a bigger take," she said. "When prices are at average, Alaska is higher than most other (countries)."

The oil and gas association is a staunch opponent of revising the tax structure.

"The companies are paying a fair share and they are carrying the entire burden of risk ... they make a strong contribution in jobs and spin-off industries," Brady said.

But the Democrats say that their bill will provide strong incentives for companies to explore and produce oil on the North Slope. The legislation would allow companies to avoid the tax if they are able to show that it would harm production. Taxes would be lower when oil prices are low.

Democrats said Monday they doubted that many companies would qualify for tax relief because most enjoy windfall profits.

The bill's other sponsors are Reps. David Guttenberg of Fairbanks, Beth Kerttula of Juneau and Eric Croft of Anchorage.

• Elizabeth Bluemink can be reached at elizabeth.bluemink@juneauempire.com.



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