Oil taxes on agenda as Legislature enters last scheduled weekend

JUNEAU — The Alaska House was gearing up Saturday to vote on a proposed oil tax overhaul as the Legislature enters what is scheduled to be its final weekend before adjournment.


Senate President Charlie Huggins has been adamant that lawmakers will finish their work by Sunday, the final scheduled day.

But that assumes the Senate agrees to any changes made by the House to the oil tax bill, SB21, the House recedes from its changes or an agreement on the bill is reached by then in a conference committee.

House Speaker Mike Chenault suggested it wasn’t out of the realm of possibility that the Senate might simply concur, saying he didn’t see a lot difference between the bill that passed the Senate and the one the House was about to vote on. “But they’re a different group over there,” he said. The House needs to worry about getting a bill passed its own members “and not worry so much about what it takes for their side. But they’re pretty tight,” he said.

The House was expected to hear a spate of possible amendments. Huggins said Friday that senators were reviewing the bill and will watch the vote before deciding how to proceed.

A Senate majority spokeswoman said she expected the bill, as is, would have sufficient support.

The bill that advanced from House Finance included a 35 percent base tax rate and $5 allowance per taxable barrel of oil produced. That credit would apply to what would be considered new oil and production that also would qualify for a 20 percent tax break known as a gross revenue exclusion. Certain units comprised exclusively of leases with higher royalty rates, and those not getting royalty relief from the state, could qualify for a 30 percent tax break.

Under that proposal, administration officials have said they expect the vast majority of Alaska’s legacy fields would be subject to a 35 percent base rate and a per-barrel allowance on a sliding scale, higher at lower prices, zero at higher prices, around $160.

A consultant to the administration has said the plan would make Alaska “far more” competitive for investment dollars than it currently is. According to that consultant, Barry Pulliam, the effective tax rate on the net value for oil that doesn’t get a gross revenue exclusion would be about 25 percent at $100 oil and about 30 percent at $120 oil. The effective tax rate for higher royalty oil that gets a 30 percent gross revenue exclusion would be about 11 percent at $100 oil and 14 percent at $120 oil.

A fiscal analysis suggested the bill could cost the state up to $4.7 billion through 2019, based on a revenue forecast that calls for a continued net decline in production and oil prices between $109 and $118 a barrel through that period. Such analyses have been billed as a worst-case scenario, given the goal behind the tax-cut plan is to increase production. The analysis did not include changes made in committee.

The Senate passed a different version of the bill last month by one vote. There has seemingly been no softening among the nine who voted against it as the bill has advanced in the House.

Gov. Sean Parnell has proposed an oil tax overhaul as a way to increase oil production and investment. Supporters say the state needs to do something to address declining production. Alaska relies heavily on oil revenues to run, and while production has been on a downward trend since the late 1980s, higher prices in recent years have helped to mask the budget impact. Critics say they want more production, too, but have labeled SB21 as a dangerous gamble that gives too much over to oil companies with no guarantees of what Alaska will get in return.


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