Oil tax debate needs overtime

Lawmakers will take up rate in special session

Posted: Wednesday, May 10, 2006

Thanks to the Alaska Senate's refusal to adopt bill modifications from the House, the debate over changing the state's oil-tax structure will continue into the special session that begins today.

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The Alaska Senate had one shot at passing a new oil tax structure before its regular annual session ended at midnight. The House concluded its dealings with the bill at 4 a.m. Tuesday and sent it to the Senate in a different form.

Sen. Gary Wilken, R-Fairbanks, counted 15 changes to the Senate's version. One of his reasons for rejecting the bill was that the Senate did not have enough time to review the draft.

"Do we really know what's been handed to us?" Wilken said.

With a handful of Republicans breaking from their fellow caucus members and joining the Democrats, the bill was defeated by the 10-10 vote. It needed 11 to pass.

When the Senate voted on the bill a second time, it failed again with a vote of 9-11.

The House lowered the Senate's favored tax rate from 22.5 percent to 21.5 percent, a point that pundits predicted would not sit well with the senators.

Sen. Lyda Green, R-Wasilla, said she supported the House's version because even though it had a lower tax rate, its sliding scale that would become effective at $50 per barrel earned more revenue than the Senate's similar escalator.

"They were nearly identical," Green said of the two versions. "I thought it was a fair deal."

Sen. Bert Stedman, R-Sitka, said even the House version was a grand improvement from the state's current tax structure that is deemed by many as "broken" for not earning more money during an era of high oil prices.

The new proposed plan to tax producers' net profits made on Alaska petroleum would replace the current system that collects on production volume.

"The upsides far outweigh the downsides," he said.

The difference in percentage points at high oil prices translates into hundreds of millions of dollars more or less for the state, according to the Legislature's consultants and the Alaska Department of Revenue.

The administration has called for a rate of 20 percent, with an offer of a 20 percent credit rate on expenditures for exploration and development.

The governor's proposal ensures that Alaska gets a fair share of revenue while prices are high, but also provides exploration incentives while reserves in the North Slope are dwindling, according to spokeswoman Becky Hultberg.

The governor on Tuesday announced a special session would begin today. The agenda calls for passing laws related to a project to build a 3,600-mile pipeline that would deliver natural gas from the North Slope to the Midwest.

But his proclamation includes language that would allow the Legislature to continue their debate on the petroleum production tax, known as PPT.

Gov. Frank Murkowski also plans to release a draft of the natural gas pipeline contract the state is trying to get a trio of major oil producers to sign.

Legislators have been told that the oil tax will be linked to the contract, setting the tax rates for the next 30 years. Many lawmakers felt uneasy about passing the net-profits tax without getting a peek at the contract.

"We can make a rational decision knowing all of the information," said Sen. Kim Elton, D-Juneau.

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

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