Report: Hard to tell effect of oil tax on industry

Posted: Wednesday, January 19, 2011

JUNEAU — Repeated changes to Alaska’s oil and gas tax the last few years have made it difficult to tell whether the tax is helping or hurting industry, according to a report released Tuesday, as the Legislature gears up to debate yet another change.

The report by the state Department of Revenue came a day after Gov. Sean Parnell proposed sweeping changes to the tax, including a cap on the surcharge triggered when a company’s net profits rise.

It’s something he believes will jumpstart investment and boost the economy, but some lawmakers — particularly Democrats — question the need for it and wonder if it’s much more than a giveaway to industry.

The proposed tax-rate change alone would cost the state treasury more than $5.2 billion between fiscal years 2013-2017, according to an analysis released by Parnell’s office.

The tax brought in nearly $3 billion in tax revenues in fiscal year 2010, slightly less than in 2009, but still far more than the state would have received under its previous tax structures, the report found.

The question of whether to tinker with the production tax for the third time in over four years looms large over the Legislature, which opened its 90-day session Tuesday. Oil is king in the energy-rich state, responsible for much of the revenue that keeps Alaska running. But production is declining, prompting politicians to scramble for ways to stem the tide.

Some House Republicans also have proposed changes in the way the tax, known as Alaska’s Clear and Equitable Share, or ACES, is calculated.

The current tax regime features a base rate of 25 percent, and a progressive surcharge triggered when a company’s net profits top $30 a barrel. The intent is for the state to share in the good times.

But the industry has complained that the tax is punitive and stifling investment.

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