A more thorough approach: Senate Bill 80 deserves legislators’ full attention, not quick reaction

Voices of the State

Posted: Tuesday, May 29, 2007

Recently, we have seen an odd conflict at play in regard to Senate Bill 80, the bill that would disallow BP from deducting the cost of repairing the gathering lines at Prudhoe Bay from their state tax bill.

On the one hand, we frequently hear critics of government complaining to the Legislature for “open and transparent” processes that assure a multitude of opportunities for public input and involvement.

But at other times, when it suits their purpose, these same critics demand immediate action, regardless how little time the Legislature may have available to properly consider the issue.

Such was the case with SB 80, when critics, including the governor, complained that, as the co-chairman of the House Finance Committee, I did not move quickly enough to hear the bill.

No doubt the bill’s premise is a good idea, and it ought to be adequately considered and debated in an open and transparent public process. However, the bill sat in the Senate Resources Committee for just short of three months before passing the Senate and had not been through one House committee hearing.

By the time we received the bill in the House on May 11, we had just five days left in the session to consider it. We also had to work on and take final action on the following major public policy issues: a sustainable increase in education funding, retooling and addressing the PERS/TRS systems and unfunded liability; community and municipal revenue sharing; the governor’s Alaska Gasline Inducement Act (AGIA); the capital budget; and the operating budget. The last two items on this list we are constitutionally mandated to pass before adjourning.

There are some very good questions about SB 80 that need answering in the open and transparent public process. We expect to give it a complete vetting at the soonest possible opportunity. This effort may be during a special session on PPT, if the governor calls one, or it may entail hearings during the interim.

BP is under a federal investigation for its apparent neglect of maintenance of the gathering lines. Shouldn’t any new law we adopt reflect the actual facts of the federal investigation, especially in light of news that the company cut out funding for corrosion inhibitors to save money, admitting this in e-mails and in testimony before Congress?

The petroleum production tax (PPT) already disallows deductions for “gross negligence.” If the state and federal investigations conclude that BP was grossly negligent, we are already covered in the current statutes.

Some are concerned with the drop in state revenue we experienced when the gathering lines were shut down and the flow through TAPS was reduced to about three-quarters, which resulted in “costing the state millions of dollars.”

Yes, it reduced the state’s revenue for the time period in which it took place, but if you consider that the oil will be pumped sooner or later, the revenue has only been postponed.

The state, also under current statutes, has the ability to seek to recover the lost economic opportunity that resulted from the Prudhoe Bay shutdown. The Department of Law is spending $8.5 million to pursue damages and could recover significant damages as a result. Fortunately, it happened at a time of high oil prices and high revenues, so it did not impact our ability to provide essential state services. Hopefully, the oil that did not get produced will be produced when the price of oil is even higher.

We hope those critics of our approach to SB 80 will agree that looking at the entire scope of the issue — and taking the time to do the job right — is more important than passing a knee-jerk reaction bill.

Mike Chenault is the Republican state House representative from Nikiski for District 34. He is the co-chairman of House Finance Committee.

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