Gov. Frank Murkowski said Wednesday the Alaska Legislature should approve a new oil tax system before getting a peek at the natural gas pipeline contract, which he claims is nearly finished.
In his first news conference since he introduced his proposal for the new taxation, the governor said he prefers legislators pass his proposal now and make changes later to the oil tax laws when lawmakers review the gas pipeline contract.
"Whatever they do on PPT (petroleum production tax), they're going to have another chance to look at it when they see the gas line (contract) because it's rolled in. They can make an amendment at that time," Murkowski said.
Murkowski's plan would take 20 percent from producers' net profits and give them a 20 percent tax credit on expenditures for exploration and long-term development.
Legislation would be needed to amend the 1998 Stranded Gas Development Act to include the oil tax policy in the pipeline contract. The act states that the contract can refer to gas but not oil.
House Minority Leader Ethan Berkowitz, D-Anchorage, said it makes little sense to pass a bill that would change later.
"It should be easier if we have everything in front of us and do it all at once," he said.
At stake is an additional several hundred millions of dollars for the state each year, which the new tax system would bring in while oil prices remain high.
Some lawmakers want to see a signed version or parts of the contract before they make changes to the governor's proposal so they know how it will affect the producers' decision on whether they will sign the contract.
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"It's like the chicken-and-the-egg problem," said Rep. Beth Kerttula, D-Juneau. "If we got the egg, what does the chicken look like?"
Murkowski said the producers will not sign a contract until the oil tax is passed. Producers want to know how much they will pay in taxes and receive in rebates before they commit to the $25 billion project, he said.
"Maybe the governor thinks we have ESP," said Sen. Hollis French, D-Anchorage. The governor expects legislators to know what the producers want, he said. The oil industry can use its leverage to pull out of the contract if the tax rate is too high, he said.
"You have to ask them what is the breaking point because I don't know," Murkowski said.
House Republicans said earlier this week they are considering the oil tax proposal as a separate issue from the natural gas pipeline.
"We're looking at this as a stand-alone bill," said House Resources Co-Chairman Ralph Samuels, R-Anchorage.
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