ACES battle looms

Wagoner predicts floor fight over oil tax legislation

Posted: Friday, November 02, 2007

Sen. Tom Wagoner, a member of the Republican minority, said that the Senate's version of Gov. Sarah Palin's proposed oil and gas tax bill is taking a wrong path, and that differing opinions among members could erupt when the measure goes to a final vote.

"You will see a major floor fight before this is over," he predicted in an interview Thursday.

Wagoner has been chafing since Charlie Huggins, R-Wasilla, chairman of the Senate Resources Committee on which Wagoner sits, allowed the committee's substitute to pass without reference to a tax rate after declining to address finance issues during hearings. Huggins said he thought fiscal issues were the purview of Senate Finance Committee members and preferred to leave those decisions to them.

"It shouldn't have left our committee without a tax rate," Wagoner said. "We didn't do out work."

Wagoner said he also was upset that efforts to have Ex-xon's presenter reveal what the oil giant makes in Alaska were deflected.

"We have a right to know what Exxon makes," he said. "BP and ConocoPhillips report what they make. Exxon refuses. But it is very relevant."

He suggested that Exxon's records should be subpoenaed.

The Resources substitute is currently before the Senate Judiciary committee, which is expected to mark up the bill and forward it to Senate Finance by next week.

Wagoner also decried a decision made Wednesday by Senate Finance Committee co-chairs Bert Stedman, R-Sitka, and Lyman Hoffman, R-Bethel, not to hire additional consultants to advise the Senate on proposed amendments to the PPT.

Wagoner said he believes the Senate should have experts on the level of Pedro van Meurs, the Murkowski administration's top consultant on the proposed natural gas pipeline project and on the PPT law, and Daniel Johnston, who was the Legislature's expert during the PPT discussions. Both appeared at a joint Legislative Budget and Audit Committee meeting Oct. 18, just prior to the start of committee meetings, to deliver a historical perspective on the legislative route to the PPT.

In an Oct. 31 letter to Huggins, the Finance co-chairs said they could not dispute the "valuable insight and perspective" those experts had contributed, but consultants of that caliber were unnecessary now. They went on to say that during last year's efforts to replace the gross value point-of-production tax (and its reliance on the outdated Economic Limitation Factor) with the PPT, it "was prudent and appropriate" to hire independent and impartial tax experts.

"By contrast, Governor Palin's amendments don't significantly change the net tax framework we implemented last year," Stedman and Hoffman said, adding that consultants already under contract to the Legislative Budget and Audit Committee, were adequate.

Wagoner disagreed, saying Palin's amendments and the current Senate substitute are different enough from the PPT to warrant availability of more expertise.

"This attitude of the co-chairs of Senate Finance is appalling to me," Wagoner said, adding that he believes Stedman and Hoffman don't want to see the PPT changed at all. "Pay a lot of attention to what happens in Finance," he said.

The situation in both houses of the Legislature is fluid with regard to what may or may not be contained in versions of ACES that make it to floor votes, Wagoner noted.

Earlier this week, the House Special Committee on Oil & Gas, chaired by Rep. Kurt Olson, R-Soldotna, passed a version that altered provisions of Palin's original bill, including dumping her proposed base tax hike from 22.5 percent to 25 percent; creating a gross progressive tax system that kicks in when oil prices reach $50 a barrel and escalates at a rate of .225 percent per dollar gross; cutting out a proposed 10-percent gross tax floor on legacy fields; and eliminating a proposed 5-percent increase in Net Operating Loss credits established at 20 percent of PPT.

That version is now before the House Resources Committee. Wagoner said the O&G version was flawed.

"My friend Kurt got sold a bad piece of meat there," he said.

Subsequent analysis by the Department of Revenue that came out a day after O&G passed its version appears to show that it would not produce the levels of revenue at high prices that the committee suggested, and far less than the governor's plan at low prices.

"It's proven to be regressive," Wagoner said.

As to ACES, Wagoner has said he thinks the PPT, under a cloud because of influence-peddling allegations that have led to federal charges and convictions of some state lawmakers, should be amended or replaced. He was opposed to many of its provisions, especially setting the base tax rate at 22.5 percent instead of 25 percent, as well as to certain types of deductible expenses allowed under PPT.

He and Olson have companion bills aimed at closing off many deductions allowed currently, especially deductions for maintenance costs associated with infrastructure neglect.

Hal Spence can be reached at

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