Not Enacting Fair Oil Tax Reforms Creates A Loss to Alaskans of
Regarding the role oil taxes play in Alaska’s multi-billion-dollar deficit, Rep. Les Gara (D-Anchorage) released a statement last week saying, “Asking the most privileged to contribute to fix our deficit is fair. Exempting the wealthiest corporations from chipping in is unfair to working Alaskans, seniors who live on modest means, and all of those who live without great privilege. A 25% tax on company profits is modest. It fairly taxes companies when they are profitable, and would have helped fund basic functions from public safety to senior and disability services to education. It would also relieve pressure on future permanent fund dividends.”
In 2017 the Alaska House of Representatives passed oil tax reform legislation which would have imposed a modest 25% on corporate profits at current prices. At today’s prices, the Alaska Department of Revenue estimates the bill would have raised $700 million in additional revenue (PDF) to help close the budget gap. At the lower price previously forecasted by the Department for this fiscal year, the House profits tax would have raised an additional $540 million. Last session the Alaska Senate did not agree to any tax reform provisions to raise what the House considered a more fair share for Alaska’s oil revenue, and they did not pass.
“Under current law, generous tax breaks leave Alaska with a vastly lower oil tax rate than that which is charged in North Dakota, Louisiana, and Texas. Under current oil tax law in Alaska, most fields that have come online since 2002, including all fields that come online in the future, enjoy a tax break that, at today’s prices, allows them to pay no production taxes at all for their first seven years of production. Those early years are frequently a field’s highest production years,” said Gara.
Quoting a news release from Gara, currently North Dakota, Texas, and Louisiana do not provide similar 7-year production tax holidays. At today’s prices, taxes in North Dakota are 250% greater than in Alaska and Alaska’s royalty payments are also vastly lower than in the Lower 48 States.
Gara said, “We should work for a fair share of our oil, not a junior share. We should do that so we can fund safe streets, good schools, a strong University, and to relieve pressure on the Permanent Fund.”
Today, Senate Bill 206, repealing the per barrel tax credits established in 2014 under SB 21 has now been introduced in the Alaska Senate by Senator Wielechowski (D-Anchorage). Under current statute, a producer is eligible for up to $8 in tax deductions for each barrel of extracted oil depending on certain conditions, such as the market price of oil.
"Recent SEC filings show Alaska remains an extraordinarily profitable place for the oil industry. At the same time, North Slope jobs are declining, and Alaska's oil revenues are at near historic lows. Yet these tax credits will drain away roughly $1 billion per year going forward," said Sen. Wielechowski. "Alaskans should not have to sacrifice their Permanent Fund Dividends for any more unnecessary oil tax credits."
According to Wielechowski, since the implementation of SB 21, oil companies have received approximately $1.6 billion in per barrel tax deductions, and that number is forecasted to increase dramatically in the coming years. This year, the Department of Revenue projects that the oil industry will take about $955 million in deductible tax credits.
"In the last three years, Alaska has seen an increase in oil production by only 30,000 barrels per day, whereas oil production has increased 2 million barrels per day in Texas and 500,000 barrels per day in North Dakota in recent years. Alaska's per barrel tax breaks are not an incentive for increased production," said Sen Wielechowski. "To those who say cutting these tax credits will impact oil production, Texas and North Dakota have oil tax and royalty systems that force oil companies to pay double and sometimes triple what ours does."
Senate Bill 206 has been referred to the Resources and Finance committees.
On the Web:
SB 206 - REPEAL OIL & GAS PER BARREL PROD. CREDITS
Editing by Mary Kauffman, SitNews
Source of News:
Alaska State Senate
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