Campaign calls for tweaks to Alaska energy tax

Alliance says ACES is discouraging investment and needs fixing

Posted: Wednesday, January 27, 2010

An energy industry trade group is using a new ad campaign to call for changes to Alaska's controversial oil and gas production tax.

The campaign by the Alaska Support Industry Alliance shows what the group says are the faces of "real Alaskans" who have lost jobs or business because of oil industry cuts. Alliance General Manager Paul Laird said the campaign's purpose is to put a face to the problem.

He said the tax is discouraging investment and needs fixing. Highly volatile oil prices, forecasts of slumping production on Alaska's North Slope and long-standing distance-to-market issues are concerns effectively out of Alaska's hands, but that the tax is not, he said.

The current tax structure, known as Alaska's Clear and Equitable Share, or ACES, is based on net profits of oil and gas production. It was meant to encourage development, through incentives such as a suite of tax credits, while also outlining a clear tax structure. But some, including in the ranks of House Republicans, worry it is doing more harm than good and actually hindering development.

A recent report by the state Department of Revenue found the tax was performing as expected. But it also recommended ways the system could be improved to spur additional development, including expanding tax credits for drilling and well work costs. Gov. Sean Parnell is pushing those ideas.

But some House Republicans have said they don't think Parnell's plan - which would include potentially hundreds of millions of dollars in additional tax credits - goes far enough. Senate majority leaders aren't convinced it's even warranted.

Sen. Bert Stedman, R-Sitka, said Tuesday that the Finance Committee he co-chairs is trying to understand all the pieces involved and won't schedule Parnell's bill until the panel has the information it feels it needs.

Sen. Lyman Hoffman, the committee's Democratic co-chair, also didn't rule out additional legislation coming out of the process.

How far any of it gets, in the constraints of a 90-day session, was unclear. While Senate President Gary Stevens said there may be no more important issue given Alaska's near-whole reliance on oil revenue to run, taking on taxation will be time-consuming and the Legislature already has a lot on its plate.

"It's important," he said, adding that it needs to be addressed if something comes to the floor. "But at the same time, we have to keep an eye on the end."

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