Alaska Democrats debut their own oil tax legislation

The Alaska pipeline.

The Alaska pipeline. (Photo by David Mark/Pixabay)

House and Senate Democrats have rolled out oil tax legislation they say will put more oil in Alaska’s pipeline without throwing the state off a fiscal cliff.

In a news conference yesterday (Monday), Democrats said the legislation would reward new production with some tax breaks, while protecting the state’s share of revenue from its oil fields.

Anchorage Senator Johnny Ellis said the state must gain from what it gives:

“Alaskans must get something in return if we reduce taxes on the oil industry,” Ellis says.

Since Governor Sean Parnell three years ago proposed oil-tax reductions to encourage investment, Democrats have rejected the idea as a “giveaway.”

The governor’s current plan would cost the state more than a billion dollars a year at projected oil prices, but bring in more revenue when prices fall.

The Democrats’ bill is more a modification than an overhaul of the state’s current tax system — commonly known as Alaska’s Clear and Equitable Share, or ACES. It would cap the windfall profits tax at 55 percent, and create credits for heavy oil research and development and the construction of new processing facilities on the North Slope. It also would provide a tax exemption for 20 percent of oil from new fields for the first seven years in production.

Democrats hope the bill – introduced in the House and Senate – will compete with the governor’s, which is already on the move and is being heard in House and Senate Resources committees this week.

While both have the goal of increasing petroleum industry investment in Alaska, Anchorage Representative Les Gara says the Democrats’ bottom line is:

“If you develop in Alaska, if you produce more oil in Alaska, we’ll give you a reasonable tax break. If you want a two billion dollar check to take to Libya or Iraq, you’re not getting that from our bill. You have to produce to get a reduction,” Gara says.

Anchorage Senator Bill Wielechowski says the Democrats’ aim to require companies to present exploration and development plans to the state before bidding on an oil field lease.

“Then the state must go ahead and review those plans and make sure they’re in the best interest of the state. This is done all throughout the world,” Wielechowski says.

The Democrats’ bill also would allow the state to partner with oil companies on investment.

Parnell’s office is currently reviewing the minority’s bill. They offered a brief statement, saying that the governor is pleased that Democrats “agree there is a problem with production under the current system.” About 90 percent of Alaska’s tax revenue comes from oil production.

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