Stevens defends Senate oil tax plan

JUNEAU — Senate President Gary Stevens on Thursday called Gov. Sean Parnell’s plan to cut oil taxes a “historic gamble” with Alaskans’ money that would give away billions of dollars in revenue to industry on “a wing and a prayer.”


In a scathing speech to business leaders Thursday, Stevens defended the Senate’s deliberate approach on taxes. He questioned what would happen after this year’s elections if Alaska had a governor willing to give industry billions of dollars with no firm commitments, a House “that falls all over itself to do the industry’s bidding,” and no Senate to question whether this is “wise economic policy.”

The Senate has a bipartisan majority, comprised of 10 Democrats and six of the chamber’s 10 Republicans. 

Stevens invoked former Gov. Wally Hickel, quoting Hickel as having said, in the months before his 2010 death, that the oil industry and companies that depend on them “are flocking to support candidates for governor and the Legislature who will do their bidding.” 

“His words,” Stevens said, “Who will do their bidding. Pressure is being applied, he said, to rewriting ACES.”

Alaska’s Clear and Equitable Share is the formal name of the state’s current tax structure. The oil tax issue came up during the 2010 gubernatorial campaign.

Last year, the Senate refused to follow the House in passing Parnell’s plan to cut oil taxes. Senate leaders, including Stevens, said they did not have the information needed to make a sound policy call. 

Stevens, R-Kodiak, said it’s a bit disingenuous for Parnell to say his plan is superior because industry supports it more than the current Senate plan. He said it’s no surprise industry likes Parnell’s plan better because it’s the bigger tax cut — billions of dollars versus hundreds of millions of dollars in the Senate plan.

He said he didn’t begrudge industry that; corporations exist to make profits, he said.

He also voiced skepticism about the $14 billion in commitments the governor says he’s elicited with his tax plan. That figure includes $5 billion that BP and ConocoPhillips have talked about collectively, the bulk of which would likely be spent over six-plus years, according to a BP official. 

For projects at Prudhoe Bay, Exxon Mobil Corp. also would need to buy in. An Exxon official has testified that Exxon “fully supports” BP and ConocoPhillips’ plans. Exxon’s blessing isn’t needed for projects at Kuparuk, where ConocoPhillips sees potential for new investment.

Armstrong Oil and Gas Inc. also has said $9 billion in investment is possible between it and Repsol E&P USA Inc. with a change on the order of what Parnell has proposed. 

“Like Ronald Reagan, I believe in trust but verify,” Stevens said. “Alaskans have been deceived so often by the industry that we have a right to say, prove it. Casual words are not enough.”

Stevens called Parnell’s plan a $2 billion giveaway. That number arose from last year’s debate.

Estimates revised by the Department of Revenue since last session show Parnell’s overall plan would reduce revenue to the state by $1.3-$1.5 billion next year and up to $1.45-$1.65 billion in fiscal year 2018. That is based on the fall revenue forecast and assumes no new investment or production.

The department has said the current Senate plan, SB192, would cost the state between $100-$125 million next year and $175-$200 million in fiscal years 2015-2018. It lists as indeterminate the impact of provisions that would reward new production and separate oil and gas for taxation purposes.

“The governor’s $2 billion give away is a historic gamble with your money,” Stevens said. “He hopes that it will lead to greater riches, to a million barrels a day through (the trans-Alaska pipeline). But you have to ask, Is that reasonable? It will take many times the $5 billion suggested to even flatten the decline” in oil production.

Stevens’ audience Thursday included representatives of BP and business and pro-development group officials affiliated with the “Make it Meaningful” rallies for oil tax changes, held earlier this work.

Rick Rogers, executive director of the Resource Development Council, said Hickel and another former governor referenced by Stevens, Jay Hammond, didn’t have tax regimes nearly as high as what exists today. He said the current tax structure is hampering the investment needed to slow, or perhaps even stem, the trend of declining oil production.

Stevens’ speech Thursday touched on the historical relationship between the state and the oil industry — which he said has been an “abusive” one, causing wariness among Alaskans in trusting industry. He said there were lessons to be learned from Hickel and Hammond, who he said agreed on the state constitution and using the state’s resources for the maximum benefit of Alaskans. And he called for civility in the oil tax debate.

All sides say they want meaningful change. It’s just a matter of finding what “meaningful” is.

The Senate Finance Committee is rewriting SB192. Among other things, Stevens said he thinks the state needs to share more with industry at oil prices above $100 a barrel and total government take should be in the middle of the pack worldwide. 


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