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Parnell pushes changes to energy tax

Department of Revenue report recommendations include expanding tax credits for drilling

Posted: Friday, January 15, 2010

Gov. Sean Parnell said Thursday that he wants to give oil and gas companies greater incentives to do business in the state, a plan he says will boost production and create potentially hundreds of new jobs for Alaskans.

The plan comes amid forecasts of slumping oil production on Alaska's North Slope and concerns by some Republican lawmakers that a state tax on oil and gas production - passed two years ago at the urging of then-Gov. Sarah Palin - is doing more harm than good and hindering new development.

A report released Thursday by the state Department of Revenue did not attribute industry woes to the tax; in fact, it found the tax was performing as expected. However, it did recommend ways the system could be improved to spur additional development, including expanding tax credits for drilling and well work costs.

Parnell said the recommendations strike a balance between protecting Alaska's interests and declaring the state open for business. While the state currently has billions of dollars in budget reserves, Parnell said its economy is struggling and he's trying to create more jobs and opportunities. The estimated hundreds of millions of dollars in additional tax credits are a small price to pay, he said, for a state that runs on oil and gas revenue.

He said he'd ask lawmakers, who begin meeting in regular session next week, to approve his plan.

Whether they do is anyone's guess.

This is an election year, with many lawmakers - and Parnell himself - vying for re-election to their current offices or new ones.

House Republican Jay Ramras, a critic of the tax system who's running for lieutenant governor, called Parnell's plan modest but a starting point for a long-overdue debate. House Minority Leader Beth Kerttula said she is willing to take a "good, hard look," at any proposals for change, particularly if the industry can prove its being hurt by the tax.

Neither, though, expected much more than spirited debate on the issue during this session.

"There are powerful people in the Legislature that believe (the tax) is working and powerful people that believe it is not, and that's often a recipe, not for compromise, but for stalemate," Ramras said. "And in this case, stalemate will result in the status quo."



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