Committee to consider tax rate today

Members to discuss increasing Murkowski's 20 percent proposed rate hike to 25 percent

Posted: Friday, March 17, 2006

The Alaska House Resources Committee on Thursday took a crack at some bold changes to the governor's oil tax bill, including one that would save the state $300 million over the next seven years.

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A committee substitute available for the first time Thursday set the stage for members to make amendments to the new version. Several of the more complicated changes were postponed until today for further discussion.

Committee members will consider increasing the 20 percent tax rate suggested by the governor to 25 percent. Rep. Mary Kapsner, D-Bethel, is leading the charge on that amendment.

Her proposal is concurrent with the recommendations of three consultants hired by the Legislature and the governor's top oil expert, Pedro van Meurs.

Committee co-chairmen Ralph Samuels, R-Anchorage, and Jay Ramras, R-Fairbanks, said they will vote "no" on the amendment, which would earn several hundred million dollars more than the original rate.

The chairmen say they are cautious because they don't want to discourage future development in the North Slope.

House Bill 488 and its companion, Senate Bill 305, seek to eliminate the current tax regime that collects on production, as it has been critiqued by industry watchers as outdated. The new system would tax oil producers' net profits on petroleum pumped from leases in Alaska.

Committee members were successful in scrapping a plan to allow the industry to deduct $300 million worth of expenses spent on long-term infrastructure over the past five years.

Rep. Paul Seaton, R-Homer, who voted for the amendment, said oil companies' decisions to go forward with future projects will be based on the structure of the new tax system and credits offered.

"I don't think they are going to be based on things that happened in the past," he said.

The initial committee substitute scaled down the rebate from $1 billion to $300 million by allowing only a certain percentage of costs deductions over the last three years instead of five.

The amendment proposed by Kapsner narrowly passed with a 5-4 vote.

"I was surprised," Samuels said. He didn't support the amendment but said oil companies recovered some of their costs when prices skyrocketed.

Seaton tried to lower the threshold price on a provision that increases the tax rate by 0.30 percent for each $1 increase over the threshold mark of $50 a barrel. Seaton suggested dropping that price to $45 a barrel.

Samuels said the suggested drop on the sliding scale - which would mean more taxes on producer's profits - would reach a point that would discourage investment. The amendment failed with a vote of 3-6.

Today the committee is also expected to consider taking anything that relates to natural gas out of the bill.

Rep. Harry Crawford, D-Anchorage, said not enough information has been provided about the effect on current and future natural gas production in the Cook Inlet and the North Slope, or how the tax will relate to the planned gas pipeline.

"The state could be subsidizing the construction and production facilities for gas fields that we have no intentions of doing, and then writing off the profits against oil," he said.

Crawford said he intends to introduce an amendment to separate gas from the bill. He also plans to introduce an amendment that would ensure the state "doesn't lose its shirt" when oil prices are low, he said.

According to the Legislature's consulting firm, Econ One, the state would make less money than the current system if prices drop below $32 a barrel. The amendment will propose that the current production tax system kicks in at that price, Crawford said.

Samuels said he expects to move the bill out of the committee today after a vote on the amendments.

The Senate Resources Committee canceled its meeting on Thursday as its committee substitute was not finished yet, according to Mary Jackson, aide to Chairman Tom Wagoner, R-Kenai.

Jackson said the committee will have a draft ready for the public today.

• Andrew Petty can be reached at andrew.petty@juneauempire.com.



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