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Oil Tax Loopholes Gave More to Oil Corporations In Profits
Than Alaska Received in ANS Oil Revenue


July 13, 2004

Alaska - With the close of the State of Alaska's 2004 fiscal year this month, the state announced oil averaged $31.71/barrel for the past 12 months. According to a recent Department of Revenue Estimate, oil companies received over $1 billion more in pure profits from ANS clued oil than the state received in total ANS oil revenue. That imbalance has caused Former Governors Jay Hammond and Wally Hickel, former Deputy Commissioner of Revenue Deborah Vogt, and 7 Democrats who proposed oil revenue reform legislation this year, to call for a revisitation of the tax loopholes in Alaska's outdated oil tax structure.

Rep. Les Gara, a co-sponsor of the bill, says we need to do two things with our tax laws. "First, Alaska needs to receive a fair share for our resources. Second, we need to give oil companies incentives to produce. The current law fails on both counts, overtaxes at low oil prices, and leaves Alaskan's terribly shortchanged at current at average, current and higher prices." Bill co-sponsor Hollis French says "we can write our tax laws in a smarter way that's better for Alaskans, and that encourages new investment in a wiser way. Just giving away tax relief on highly profitable fileds, no matter how high the price of oil is, makes little sense."

Under the current law, Alaska's production tax averaged 13.5% in 1993. It has fallen to 7.5% today, and is projected by the Department of Revenue to fall to less than 4% in the next decade. Eleven of the most recent 14 oil fields to come on line since 1989 pay none of the state's 15% production tax, including Endicott, the nation's 29th largest oil field. The state's production tax was intended to grnat a tax break to marginal oil fields, but now grants complete and near complete production tax exemptions to exceptionally profitable fields as well. Even the nation's second largest field, Kuparuk, only pays a 3% production tax.

Governor Jay Hammond's stated "I applaud Rep. Gara's efforts to re-examine ELF. Despite assurances its application would not lower the then agreed upon Alaskan share of our oil wealth "pie", subsequent circumstances indicate the state has, since the '80s, lost hundreds of millions which have instead gone into oil company coffers. The initial pie sharing agreement was roughly 1/3 to the state, 1/3 to the feds and 1/3 to the oil companies. Until that is assured, serving the best interests of Alaskans demands a re-evaluation such as Rep. Gara's legislation would compel. Be assured were the oil company's share of the pie being reduced by a third over the same period they would have long ago demanded such review."


Source of News Release:

Alaska Democrats
Web Site


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