June 07, 2006
Wednesday

Tuesday night the Alaska House voted to impose a 23.5 percent tax on the net profits of oil companies' producing oil and gas in the state, but the Senate quickly rejected the proposal. Following a lengthy closed-door meeting of the Republican majority, the Senate, which met later Tuesday night rejected the House's bill 8-to-12.

The House and Senate did appoint a conference committee to come up with a compromise bill before the special session adjourns at midnight Thursday.

As the Legislature nears the conclusion of the special session considering raising oil taxes, Governor Frank H. Murkowski warned in a letter written to Senate President Ben Stevens (R-Anchorage) and House Speaker John Harris (R-Valdez) of the potential impact of setting a tax rate that is too high, and which Murkowski says would therefore discourage industry investment in Alaska.

In his letter the Governor asked the Legislature to consider the following:

• In February the Administration obtained the Producers' agreement to double Alaska's oil production tax rate and to move forward with a gas pipeline project.
• The House PPT plan puts the gas pipeline project and producer investment in Alaska oil and gas development in jeopardy. The 23.5 percent tax rate and aggressive progressivity would triple Alaska's oil production tax rate at current oil prices. At 60 percent, Alaska's government take would be the highest in North America and make Alaska uncompetitive with other international projects...
• This is a situation in which more is less. The Constitutional goal is to maximize oil and gas value to the state over time. The 23.5 percent tax rate may make the state more money in the short term. But by drying up the substantial investment needed to increase the flow of oil through TAPS and by threatening the gas pipeline project, the House-passed PPT is detrimental to the Constitutional goal.

Murkowski wrote, "Alaskans expect us to negotiate an acceptable gas pipeline agreement and to increase the flow of oil through TAPS. I urge the Legislature to seriously consider whether a tax rate higher than the 20 percent I proposed is worth risking the gas pipeline project and the increased investment in oil and gas development in Alaska that I have already negotiated."

Also on Tuesday night the Senate approved the freeze and other changes to the Stranded Gas Development Act on a 12-to-8 vote. The Alaska Senate voted to give Governor Murkowski the authority to freeze the oil and gas taxes of the three companies in negotiations to build a North Slope natural gas pipeline.

The Stranded Gas Development Act bill may likely go no farther as the House does not plan to bring it to a vote before the special session adjourns Thursday

Senate President Ben Stevens (R-Anchorage)) says the vote was necessary and sends a message to the industry that if you want certainty, these are the terms.

Senator Kim Elton (D- Juneau) gave notice of reconsideration of his vote. This would mean it could be taken up during the next floor session.

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