Tax debate takes on a different tone

Posted: Sunday, November 11, 2007

The debate over Gov. Sarah Palin's oil tax bill is no longer just about money. Now, it's also become a matter of accountability.

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

Palin called lawmakers back to Juneau to revisit the oil tax just over a year after the Legislature passed sweeping changes - the first in nearly two decades - because she believed the law was tainted by the investigations.

Rep. Mike Kelly, R-Fairbanks, reminded the House Finance Committee of the corruption backdrop while seeking to amend the bill with a higher per barrel surcharge as the price of oil increases.

"We have to recognize the reason we are down here - the only reason in my opinion we are down here - is that we have folks either indicted, convicted or under investigation - and they weren't the janitors around here," Kelly said.

Kelly was referring to former House Speaker Rep. Pete Kott and former Oil & Gas Committee Chairman Vic Kohring, who have been convicted of bribery; former Senate President Ben Stevens and current Senate Rules Chairman John Cowdery who are under investigation; and former House Finance Committee member Bruce Weyhrauch who is awaiting trial. Kelly also referred to former Labor & Commerce Committee Chairman Tom Anderson, who was convicted on bribery charges separate from the oil tax corruption.

"That's not the low-level people around here; that's top dogs," Kelly said. "I think our job is to try to put this to bed for a dozen years so we can send a stability message to the oil industry."

Rep. Mike Hawker, R-Anchorage, agreed with Kelly's premise but not his call to double the surcharge from .2 percent to .4 percent as oil prices climb. It's called progressivity and is an effort to ensure the state prospers from rising oil taxes along with the oil companies.

"We do need to be here," Hawker said. "We need to be having this discussion again for the reasons he mentioned. It's important to re-establish our credibility with our process with the people in the state of Alaska."

Kelly prevailed with his amendment in the committee, but it's not the final word. The bill's fiscal terms are expected to be vigorously debated as late as the waning hours of Friday night, the last day of the special session.

Earlier Hawker and Finance Chairman Mike Chenault, R-Nikiski, successfully introduced an amendment that would hold oil companies accountable for properly maintaining the oil field facilities. The issue is a holdover from the regular session.

Sen. Tom Wagoner, R-Kenai, and Rep. Kurt Olson, R-Soldotna, each had bills during the regular session that would prohibit deductions on repairs stemming from negligent or poor maintenance.

Saturday's amendment to Palin's tax bill is linked to last year's partial shut down of Prudhoe Bay after BP discovered some transit pipeline corrosion for the second time in a year.

The line had two leaks and the company ultimately decided it would need to replace the 16 miles of pipeline. Under current law, the company may deduct some of the $260 million in costs to replace the line.

Lawmakers, however, have struggled with crafting language that isn't considered overly punitive. Hawker and Chenault's amendment deals with oil field operations that "result in failure to take necessary actions to prevent a pipeline spill."

The amendment passed unanimously.

"In writing tax law, every legislative body has an obligation to protect as well as collect," Hawker said. "That is, protect taxpayers operating in good faith from events, activities reasonably beyond their control.

"But likewise we need to clearly make sure we collect from who we want to pay the state and what we want them to pay. What this does is protect and collect. We need to be mindful of that for this whole bill."

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