Legislators taking on gaming issue

Posted: Sunday, July 16, 2006

Legislators entered a second special session in 2006 last week with a new word stuck in their heads: gaming.

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Legislators on both sides of the aisle question whether the North Slope's major oil producers could manipulate the governor's proposed changes in the state's petroleum tax structure and hoard more than their fair share of profits. Working the system to exploit oil-tax loopholes and deductions is what Alaska lawmakers call gaming.

Late last week, the administration's tax experts and oil industry officials attempted to convince legislators that manipulating the state's proposed net-profits tax would be difficult, if not impossible.

If they did manipulate, they would be subject to steep fines or jail time, industry officials said.

"The notion seems to be that if we increase the (corporate) costs that are deductible, the companies will cheat us out of all the taxes," said Dan Dickinson, the Murkowski administration's tax consultant.

Fueling the debate

Public forum on gas pipeline

When: 12-3 p.m. Monday.

Location: Centennial Hall.

Speakers: Gov. Frank Murkowski, Revenue Commissioner Bill Corbus, Natural Resources Commissioner Mike Menge, and Attorney General David Marquez.

"It's not true ... the rules in the bill are very well defined about what costs are allowable (for deduction) and what aren't," Dickinson said.

House Democrats, and many Republicans, disagree. "It's not at all clear. It's very ambiguous," said House Minority Leader Ethan Berkowitz, D-Anchorage.

He cited the state's ongoing legal battles with oil companies over issues ranging from the Exxon Valdez oil spill settlement to the property value of the Trans-Alaska Pipeline System.

"Part of the virtues of a tax on the gross profits is that it will be much more stable, with less litigation," Berkowitz said.

House Democrats have introduced two bills, 3003 and 3004, advocating production taxes on the gross, rather than net value, of oil and gas.

Sen. Tom Wagoner, R-Kenai, is also working on a gross production bill, he said last week. Wagoner and House Speaker John Harris recently joined gubernatorial candidate John Binkley at an Anchorage press conference, declaring a gross tax would be simpler and less easy to game.

"There's no question that if you go to gross, it would be simpler," responded Dickinson. "What we (in the administration) are trying to do is encourage investment," he said.

After two days of listening to testimony, key legislators said last Friday that they are holding judgment.

"We haven't made any decisions. We've methodically stepped through the (governor's) bill and tried to define what's really meant by a net profits tax ... and how that could be gamed," said Sen. Ralph Seekins, R-Fairbanks, chairman of the Senate's Special Committee on Natural Gas Development.

"It's not just a question of (deducting) a three-martini lunch," said state Sen. Kim Elton, D-Juneau. "There are all kinds of shades of gray ... of what is good and not good for the state," he said.

But so far in the special session, "It's been hard to get the tenor of the Legislature. There is a whole new dynamic that a lot of us are noticing ... Alaskans are a lot more engaged in this debate than they were a month ago," Elton said.

When the Legislature returns from a break, the special committee on gas will also hold hearings on the legislation for an amended gross production tax, and it will take on the governor's two proposed amendments to the Stranded Gas Act.

The Legislative Budget and Audit Committee announced Friday that it will direct legislative consultants to perform a new feasibility analysis of the Alaska Gasline Port Authority's proposed liquid natural gas route from the North Slope to Valdez.

The Legislature gaveled out on Friday and will reconvene July 24.

• Elizabeth Bluemink can be reached at elizabeth.bluemink@juneauempire.com.

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