SitNews - Stories in the News - Ketchikan, Alaska



April 01, 2011

(SitNews) Juneau, Alaska – The Alaska State House of Representatives today passed major tax reform legislation encouraging new investment in North Slope oil fields to reverse production declines, keep trans-Alaska oil pipeline flows steady and halts the loss of oilfield and service company workers.

HB 110, sponsored by the House Rules Committee at the request of Governor Sean Parnell, R-Alaska, modifies key provisions of former Governor Sarah Palin’s Alaska’s Clear and Equitable Share, or ACES, oil tax regime. The reform bill restores Alaska’s competitiveness in the pursuit of industry capital by lowering production taxes at high oil prices and boosting incentives for companies to bring new production online.

“We firmly believe that doing nothing is not an option,” said House Speaker Mike Chenault, R-Nikiski. “Even if we got it right back when we passed ACES, which I don’t think we did – the global oil industry has changed since then. It’s night and day. New technology has opened up more places for development and Alaska, with some of the highest production costs and highest oil taxes in the world, is simply no longer competitive.”

The bill separates production into two new tax brackets with incremental increases to the state’s take. Existing production is taxed at a 25-percent base rate and capped at 50-percent. New production will be taxed at a 15-percent base rate and capped at 40-percent. A credit for production-generating drilling increased by 20-percent and several adjustments were made to ACES provisions to establish a better business relationship between the state and industry. The state’s royalty share, and corporate and property taxes are unchanged.

In his legislative report, Rep. David Guttenberg (D-District 8) wrote, "One thing stood out, everyone there wanted to increase production and put more Alaskans to work." He said, "I would have liked to have been able to vote yes for something that would have done that. HB 110 gave Alaskan’s no guarentee of any type of returns. It allowed for $2 Billion in tax breaks to the industry and never required neither increased production or jobs."

Guttenberg said, "Maybe oil is king and we need keep TAPS running, our state needs to educate our children and provide services to our citizens. Using our savings while waiting and hoping for increased production was too risky under HB 110."

In her legislative blog, Rep. Bet Kerttula (D-Juneau) wrote about the bill's passage, "As I've said before, I believe that reducing taxes for oil and gas is a bad idea. Not only would it cost about $2 billion per year, the current proposal wouldn't require any guarantees by companies to even try to increase production. It also removes a lot of the incentives for production that are in the current tax structure. That's why House Democrats offered a series of amendments to HB 110 that would have fixed some of those issues yesterday, most of which went down along party lines."

“Alaskans are leaving the state; our neighbors are leaving the state. And they’re doing it because their jobs or job prospects are leaving the state,” Rep. Anna Fairclough, R-Eagle River, said. “It comes down to one simple concept: do we want to act now to stop the decline and re-evaluate our standing globally – our ability to attract investment and put oil in TAPS – or do we want to ensure that Alaska’s future will dwindle and slowly sink? We need to secure the financial footing for generations of Alaskans, our kids and their kids.”

“It’s not enough for Alaska to be profitable for investors, we also have to be competitive in the world marketplace,” Rep. Mike Hawker, R-Anchorage, a chief advocate for the bill, said. “If Alaska does not change what we consider our fair share of the resource value, we soon will have nothing to share at all.  Alaska must seek a competitive share; that is, the highest share we can achieve while still making investment appear economically attractive. While producers can make a lot of money here at high oil prices, they can make a lot more elsewhere. Quoting JFK, ‘there are risks and costs to a program of action, but they are far less than the long range risks and costs of comfortable inaction.’”

“The debate should be: do we let short-term greed stand in the way of long-term financial security? It’s easy to rake in as much money as we can today, but that risks devastating effects for Alaska’s future. And I, for one, won’t stand to let that happen,” House Rules Chair Craig Johnson, R-Anchorage, said.

HB110, which passed after reconsideration wasn’t offered today, now moves to the Alaska Senate for consideration.


Sources of News:

Alaska State House Majority Caucus

Alaska Democrats




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