Gov. Murkowski includes oil tax in special session

Posted: Friday, May 19, 2006

Gov. Frank Murkowski on Thursday expanded the agenda of the special legislative session to include an oil-tax bill the Senate dumped on the final day of the regular session.

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In a news conference, Murkowski said he planned to reintroduce his version of the petroleum production tax, a bill which would tax 20 percent of the Alaska profits of oil companies working in the state.

That tax would be offset by a 20 percent credit on companies' capital expenses and other exploration incentives.

"The 20 percent tax rate provides the balance needed to encourage the producers to make the significant investment necessary to arrest the serious annual decline of oil flowing through (the trans-Alaska oil pipeline)," Murkowski said.

Senate President Ben Stevens said the governor's 20-20 bill would immediately be replaced by a substitute version with a higher base tax rate that increases at high oil prices.

The Anchorage Republican said the bill would be similar to the version that passed the House but was rejected by the Senate: a 21.5 percent tax rate with a 20 percent capital credit.

"We expect to pick up the deliberations of the bill in the Senate where we left off," Stevens said. "We can't start this process all the way over again from day one."

In the waning hours of the regular session May 9, the Senate rejected the House's version of the oil-tax bill by a 10-10 vote. After a recess in which individual senators were lobbied to change their votes, the Senate rejected a motion to rescind that vote and take it up again.

The governor declined to say whether he would support that version of the tax, which would place a larger tax burden on industry than his bill would.

Previously, the governor's office has said Murkowski would accept a 21.5 percent tax, and even issued buttons that read: "21 1/2-20: Close Enough for Gov't Work."

The tax, which would replace the state's current production tax system, figures prominently in a draft contract Murkowski has negotiated with ConocoPhillips, BP PLC and Exxon Mobil Corp.

Murkowski intends to include those provisions in the contract, lock up the tax rates for oil for 30 years and ask the Legislature to ratify it.

Legislators are now reviewing the draft contract, which is seen as a key step toward construction of a natural gas pipeline from the North Slope to Alberta, Canada.

Stevens said he expects the bill to be introduced Saturday and for the Senate Finance Committee to work on it Saturday night and Sunday.

House Majority Leader John Coghill, R-North Pole, said the bill would not be introduced in the House until Monday.

Coghill said he does not expect the Legislature to pass the bill before lawmakers return from the Memorial Day break on May 30.

About that time, Murkowski said he expects to introduce additional bills to amend the Stranded Gas Development Act to fit the fiscal contract negotiated with the oil companies.

The special session ends June 8 at midnight. Murkowski said he will call another special session to begin the next day if bills remain.

House Finance Co-Chairman Mike Chenault, R-Nikiski, said he believes a second special session will be called, with the remainder of the first special session being consumed by the petroleum production tax, or PPT.

"Can we do both stranded gas and PPT? I doubt that will be done by the ninth of June," Chenault said. "Can we do PPT by the ninth? Conceivably. We've already fought the majority of the battles, it's just tweaking the PPT in certain places."

Sen. Kim Elton, D-Juneau, greeted the announcement of the oil tax and a possible second special session with skepticism over who was in charge, the governor or the Legislature.

"I'm beginning to think this is a carefully choreographed special session," Elton said. "I think it's been carefully orchestrated, carefully choreographed, and the choreographer is the governor. It seems to me that we have been visibly blurring the line between two elements of government: the executive and the Legislature."

Given the prospect of staying in Juneau for another special session, lawmakers welcomed the weeklong break planned from Wednesday so they can reacquaint themselves with their families and their businesses.

"I'm having to hire another skipper to run my boat," said Rep. Paul Seaton, R-Homer, who is a commercial fisherman.

The Legislature could be called into three special sessions this summer.

Murkowski is expected to call a separate special session in which lawmakers would be asked to ratify the final contract with the three oil companies.



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