Empire Editorial: Pass an oil tax on its own merits

Posted: Sunday, June 11, 2006

The Alaska Legislature appears to have contracted cabin fever, just in time for summer. Members' bickering about the proposed tax rate on oil profits rose with the sun's late arrival in Juneau last week, and they made it clear they would rather go home than settle the issue.

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It's a shame they shirked their duty, and not because of anything to do with a proposed gas pipeline. It means nothing will plug the hole through which Alaska's rightful income is escaping while oil prices are high.

Gov. Frank Murkowski has decided to give legislators some time to decompress (and tend to their re-election campaigns). That may be the only reasonable option at the moment, but the fact will remain when they return that they have to work together and settle on a tax rate to replace a system that currently lets oil companies rake in outrageous sums for resources that are owned by the people of Alaska.

Forgotten in the melee is the fact that a change in oil taxes is needed to address the state's long-term revenue needs - not just as an attempt to bribe oil producers into building a gas pipeline.

For months now, and particularly in the closing days of the special session this week, lawmakers wrestled over a percentage point or so of taxes on producers' Alaska-generated profits. The Senate wanted 22.5 percent; the House wanted 23.5 percent. The governor, and the oil companies, complained that those rates were too high, potentially jeopardizing further development and construction of a natural gas pipeline costing $19 billion or more and unlocking Alaska's vast gas reserves. They further argued that the rates must be locked in, free from meddling by future legislatures, for decades, or the pipeline could not be assured.

The truth is, the pipeline cannot be assured at any of the discussed tax rates. But while the tax remains where it is, Alaskans will continue to be ripped off daily during a time of extraordinary oil prices and profits for the industry.

Whenever legislators reconvene, whether this summer in another special session or later, they must be prepared to change the tax system before more profits gush out of the state. The gas line is Alaska's biggest wish for the future, but it is not the only issue to consider. The first order of business is to secure a fair return on the state's resources.

Locking in tax rates as an inducement to companies that may or may not come through with a pipeline makes no sense. Lawmakers should settle on a rate that makes sense for now, pass it with the understanding that it won't change drastically unless unforeseen information comes to light, and then move on to gas-line considerations.

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