Governor Again Asks Legislature
to Consider Potential
Negative Impacts if PPT is Higher Than 20 Percent
June 07, 2006
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
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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