House continues struggle over tax rate for oil industry

Posted: Tuesday, May 09, 2006

After a day of delays, the Alaska House of Representatives debated late into the night Monday on a bill that would revamp the state's oil-tax structure.

At press time, members were inching their way through the first of several amendments.

"Everybody had some time to sleep on it," said Rep. Mike Kelly, R-Fairbanks, who began the Monday's debate by proposing to change the bill's tax rate from 20 percent to 22.5 percent.

Rep. Pete Kott, R-Eagle River, interrupted minutes later to lower Kelly's amendment to 21 percent, a move approved with a vote of 22-17.

Then, following some confusion over the voting procedure, Kelly withdrew his amendment, canceling Kott's efforts.

Lawmakers have been volleying over the tax rate ever since the governor released the bill in February.

Gov. Frank Murkowski and several legislators say an increase above 20 percent over the next several decades would diminish oil companies' future in Alaska. Because the North Slope pumps about 900,000 barrels a year, or about half the volume that flowed down the pipeline in the 1980s, more investment will be needed to find more oil.

But consultants hired by the Legislature say a rate of 25 percent would be a safe bet, considering that producers are enjoying record profits and the increase would still make the state globally competitive.

The difference in a few percentage points could mean several hundred-million dollars more for the state treasury.

The net-profits tax would collect on oil companies' earnings on Alaska petroleum, making it lucrative in an era of high oil prices. But the bill has Alaska losing more revenue than the current system if prices fall below $30 a barrel.

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According to the Alaska Department of Revenue, the governor's proposal - which includes incentives to encourage exploration and development - at $60 a barrel would bring in $1.6 billion more than the current system that taxes production.

• Andrew Petty can be reached at

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