JUNEAU, Alaska (AP) — The Senate Finance Committee late Thursday advanced a new oil tax plan, one day after members expressed shock at how much the prior bill would cost the state.
The bill could be on the Senate floor for debate as early as Monday.
The latest version of SB21 indicates the state would lose $775 million to $875 million next fiscal year, based upon the Department of Revenue’s fall forecast of oil taxes and production. The forecast predicted a continued net decline in North Slope oil — the state’s economic lifeline — through 2022, and prices ranging between $109 and $118 a barrel through 2019.
The fiscal analysis for the prior version of the bill indicated a negative fiscal impact, a mix of the effect on revenue and the operating budget, of between $1.1 billion and about $1.3 billion next fiscal year.
Members of Senate Finance say they are trying to find the balance between making Alaska a more competitive place for new investment — a stated goal of the current effort — and protecting the state treasury.
The version released Thursday would, among other things, increase the base tax rate from the current 25 percent to 35 percent through 2016. The rate would then go to 33 percent. The proposal also includes a $5 allowance for each taxable barrel of oil produced and a 20 percent tax break, known as a gross revenue exclusion, for oil from new fields and new oil from legacy fields.
The earlier version from the panel set the base tax rate at 30 percent. It also put a 10-year time limit on the gross revenue exclusion, which is not included in the new bill.
The latest proposal, like the others, would eliminate the progressive surcharge triggered when a company’s production tax value hits $30 a barrel, something critics see as a giveaway to oil companies. The surcharge has been credited with helping to fatten state coffers, but companies say it eats too deeply into their profits when oil prices are high, discouraging new investment.
Consultants have told the committee that changes being considered would make Alaska more competitive. Indeed, a consultant to the administration, Barry Pulliam, said the proposed changes “should cause quite a bit of excitement” about Alaska. He told the committee Thursday night it would be “economically irrational” if the changes proposed didn’t lead to more investment or production.
Representatives of the North Slope’s three major players, BP PLC, ConocoPhillips and Exxon Mobil Corp. testified, however, that while the latest proposal is an improvement over the current tax structure, it doesn’t go far enough toward attracting the kind of investment the state is looking for.
Industry representatives declined an invitation to testify Wednesday, but received a more direct request to appear Thursday evening, said Rep. Anna Fairclough, R-Eagle River.
Sen. Lyman Hoffman, D-Bethel, said he found it hard to believe the companies would say something they don’t believe, and in light of that, called consideration of the proposed tax cut, a “very, very high stakes gamble.” Pulliam, in his analysis, estimated it could take an additional 90,000 barrels of oil a day to offset the projected fiscal impact from 2014 to 2019.
Fairclough said there is fear in moving any money across the table, but she said those contemplating that are doing so out of a love for Alaska, and a desire to spur more production.
Co-chair Kevin Meyer said there’s a certain amount of risk in making a change, because it will mean less revenue in the short run. “But in my mind, to do nothing is much worse than to take this risk in hopes of getting something, which is a better future for Alaska,” he said.
Sen. Bert Stedman, R-Sitka, and a leader of Senate efforts to overhaul the tax structure last year, said the bill is an improvement over the prior version, which he said left a lot of people pale-faced. But he said he remains concerned that more money than necessary would be given over to the companies. He said he’s also concerned with the speed with which the bill has moved.
Asked if there was pressure within the Republican-led majority to support a bill, he said it’s easier for the more seasoned legislators to resist.
Democrats say attempts to define new oil in legacy fields could get messy, a task that would be left to the Department of Natural Resources. House Democratic Leader Beth Kerttula called it “lazy law to punt the tough decisions to agencies to decide what is actually new oil.”
Sen. Bill Wielechowski, D-Anchorage, said he supports the higher tax rate proposed under the latest bill but still couldn’t support the package, calling it a “massive giveaway.”
Senate Majority Leader John Coghill said the plan, if the bill advanced from committee Thursday, was to begin debate on the bill on the Senate floor Monday. He said he thought there were enough votes, at this point, to pass it.
If the bill were not to pass on the floor, it could get sent back to committee, which might mean a special session, Coghill said.
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Follow Becky Bohrer at http://twitter.com/beckybohrerap .
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Online:
SB21: http://bit.ly/155354v
