July 13, 2006
Thursday

Alaska Governor Frank H. Murkowski Thursday introduced legislation that makes revisions to the state's oil production tax structure. The governor's bill keeps the tax at 20 percent of net profits, with a 20 percent tax credit feature, but incorporates important changes made by legislative committees during the special session that ended in June. He also introduced a bill to make changes to the Stranded Gas Development Act that will allow for finalization of a gas pipeline contract.

"The 20 percent net profits tax provides an increased return to the people of Alaska that is fair, but will encourage - not jeopardize - future investment that is crucial to our economy," Murkowski said. "With a higher tax rate, as we saw proposed during the last two sessions, or with a tax on gross profits, for which the minority Democrats have advocated, we are convinced the producers would have little or no incentive to invest in Alaska. That would inevitably lead to a downturn in the economy as the oil flow through TAPS would stop somewhere around 2030.

Murkowski urged legislators to take the long-range view of the state's future when considering the PPT and the need to balance increased revenue with substantial increased investment to arrest the decline in the flow of oil through TAPS. He said some legislators and others who have been critical of the 20/20 proposal risk missing the window of opportunity to get Alaska's North Slope gas into Lower 48 markets if action on the gas pipeline contract is delayed. The new tax rate is to be incorporated into the contract, which the governor hopes to have finalized and approved by this fall.

The governor's new PPT bill does not include a progressivity factor or a gross tax floor of either three or four percent, both of which features were included in House and Senate versions of the bill.

"This bill will greatly improve Alaska's oil and gas tax system, encouraging investment in the state, making tax administration more predictable, and better reflecting the variable economics of oil and gas development," Murkowski said. "These changes will provide Alaskans with a fairer share of the value of the oil and gas taken out of the ground in our state and provide fiscal certainty for future generations of Alaskans."

The provisions of the new bill on the Stranded Gas Development Act are based largely on changes to a previous bill as proposed by the Senate Special Committee on Natural Gas Development. The new bill would authorize the commissioner of revenue to negotiate fiscal terms relating to oil, and includes provisions relating to certain payments to municipalities and nonprofit organizations.

"I continue to believe that the fiscal contract we have negotiated with the producers would be in the public's best interest," Murkowski said. "However, it is my intent to respond to the concerns expressed by the Legislature and by members of the public concerning the provisions in the contract that provide for fiscal certainty on oil taxes. I encourage the Legislature to continue its review of the gas pipeline contract and consider amendments to the Stranded Gas Development Act that will provide a sound foundation throughout the duration of the contract."

Source of News:

Office of the Governor
www.gov.state.ak.us

 

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