Alaska Legislature enters third stage of oil tax review

Judiciary committee backs Palin's call for 25% tax on net profits

Posted: Sunday, November 04, 2007

As quick as one Senate committee gutted Gov. Sarah Palin's oil tax bill, another replenished it.

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On Friday, the Senate Judiciary Committee released its preliminary revision to Palin's bill and reinserted fiscal provisions the Senate Resources Committee deleted last weekend.

The judiciary committee is backing Palin's call for a 25 percent tax on net profits - up from 22.5 percent - and doubling her .20 percent surcharge that captures more money as the price of oil increases.

"It struck me as too important a component for us not to have some sort of influence on it and for us not to put the rate back in," said committee chairman Sen. Hollis French, D-Anchorage.

French said he hopes to have the bill ready well in time for the Senate Finance Committee's first hearing Monday morning.

Meanwhile, the House Resources Committee is likely to finish its work on Palin's bill by Sunday, said committee chairman Carl Gatto, R-Wasilla, on Friday.

"I think it's going to look a lot like the governor's bill," said Gatto. He said he'd like to reinsert the tax rate removed by the House Oil and Gas Committee last weekend.

The oil industry says that increasing the taxes for the second straight year could create an unstable investment climate.

The North Slope lease holders, BP and ConocoPhillips, have implored the Legislature to at least keep the rate as it is. Exxon Mobil said it needs to be lowered, not raised. None has threatened to pull up stakes, but ConocoPhillips provided a detailed understanding of how the bill's fiscal changes could jeopardize some projects.

With North Slope production at a 6 percent annual decline, producers say the focus should be on a long-term economic outlook by encouraging production.

"When you consider Alaska's resource potential and the current production decline, we do not support the proposed tax increase by the administration," said Craig Haymes, who oversees Exxon Mobil's Alaska operations.

Exxon also thrust itself into a change proposed by the Senate Judiciary Committee, which is seeking a provision that would require companies like Exxon to disclose enough information for the state to calculate net profits.

Lawmakers have been pleased with the annual disclosures from BP and ConocoPhillips, but some are insulted by Exxon's philosophy to withhold them.

"If we are going to have a net tax system, I've got to know what your net profits are," French said.

A third round of hearings begins next week when Senate and House finance committees review the latest versions of the bill.

House Finance Co-Chairman Mike Chenault, R-Nikiski, said he will oversee the hearings as he did during the regular session with Palin's gas line bill.

Fellow Co-Chairman Kevin Meyer, R-Anchorage, typically runs hearings on bills but he also cedes control to Chenault on oil-related bills because of his work with ConocoPhillips.

Chenault said the hearings will feature testimony from the administration and producers, and he is hoping for a narrowly tailored debate.

"We are here to talk about a tax proposal," he said. "While we may or may not understand the geology of how oil comes out of the ground, our job is to figure out the correct tax and that's the direction we are going to go."

The oil tax has also been at the heart of a federal corruption probe that started in Juneau with state lawmakers and has now stretched to Capitol Hill, where Sen. Ted Stevens and Rep. Don Young, both Alaska Republicans, are under scrutiny.

Palin called state lawmakers back to work because she believes last year's oil tax law was tainted by the corruption charges that have produced guilty verdicts against three former lawmakers.

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