Palin releases draft of oil tax bill

Plan would boost state's net profits tax to 25 percent

Posted: Wednesday, October 03, 2007

Alaska Gov. Sarah Palin has released a bill proposing to boost oil taxes for the second straight year, setting the stage for a battle with major petroleum producers.

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Palin's bill, released to lawmakers late Monday, would boost Alaska's net profits tax from 22.5 percent to 25 percent.

Legislators have until Oct. 18 to digest the contents of the 46-page bill before returning to Juneau for a special session, where they will reconsider a tax increase passed last year called the Petroleum Profits Tax.

Behind-the-scenes machinations during the tax debate last year formed the basis of federal corruption charges against several former lawmakers. That prompted Palin to revisit the tax plan she called tainted and a failure.

Besides raising the tax rate, Palin's new bill proposes a change in who should pay for petroleum equipment maintenance repairs that stem from an "unscheduled interruption of, or reduction in the rate of, oil or gas production."

Palin calls her plan Alaska's Clear and Equitable Share, or ACES. Department of Revenue Commissioner Patrick Galvin said Tuesday it was a better bill than last year's Petroleum Profits Tax.

"PPT does not protect the state's interest," Galvin said. "We need the tools provided by ACES, the equitable share that will restore public confidence in our oil tax system and to provide a stable investment climate."

Palin and Galvin announced plans for a special legislative session in August. Palin last month rolled out proposed tax changes. The bill will be formally introduced in the House and Senate when the special session begins.

House Rules Chairman John Coghill, R-North Pole, said he wants to compare Palin's bill to what she said would be in it.

"The first thing I want to do is analyze how close the bill comes to her language when she told us what it was going to be," Coghill said. "My expectation is that it's going to be very close."

Opponents of another tax change already have begun to push back with public messages, including television advertisements.

Oil company executives have spoken out against a second tax change in as many years, saying it's not conducive to stimulating future investment into North Slope exploration and production. Galvin said that was not surprising.

"It's expected that any group looking at a potential tax increases is going to oppose it," Galvin said. "They have a right to participate in public discussion."

Leading the opposition is the Alaska Oil and Gas Association, an industry trade organization whose members include North Slope lease holders Exxon Mobil Corp. and BP PLC.

Executive Director Marilyn Crockett said raising taxes jeopardizes the prospects of investment into North Slope fields at a time when production is at a 6 percent annual decline.

"A balance needs to be struck between generating state revenues without destroying the economic climate here needed for investment," Crockett said.

Driving proposed changes are corruption charges linked to last year's oil tax and projected revenue shortfall under the PPT formula.

Former House Speaker Pete Kott, a Republican who served Eagle River but is now living in Juneau, was convicted of bribery last week. Former state Rep. Bruce Weyhrauch of Juneau is awaiting a trial date on corruption charges.

Former Wasilla Republican Rep. Vic Kohring's trial begins Oct. 22 in Anchorage, four days after the scheduled start of the special legislative session.

The trial could serve as an unwanted backdrop to the Legislature's work, Coghill said.

"It's a concern, a legitimate concern," Coghill said. "It lends itself to people trying to take advantage of an already bad situation.

Senate Rules Committee Chairman John Cowdery said last month he will sit out the special session after his name came up in Kott's federal corruption trial.

Cowdery's office was searched last year by the FBI. He has not been charged in the corruption probe.

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