By Sen. Kim Elton
October 07, 2007
I suspect Rev. Sloan's observation resonates with the governor as we approach the oil tax special session.
I do applaud the governor for wanting to correct the oil tax the legislature wrought last year. I voted against last year's major tax revision (in shorthand, we call last year's switch to a profit-based oil tax product "PPT") because it is fair impaired--it falls short of a good return to the state from state-owned resources. In addition, the mystery components, those parts of the profits-based oil tax legislation whose consequences could not be entirely foreseen, all seem to break toward the multi-national oil companies reaping huge profits from our state-owned oil.
Here's what has been revealed about the PPT post-passage: some elements are vague enough to provide a playground for lawyers; some elements are complicated enough to make oil revenue forecasts very, very hairy; and the 'fair share' revenues predicted in the fiscal notes accompanying the PPT didn't materialize, falling hundreds and hundreds of millions of dollars short of projections. Now we also know critical components of the PPT were forged in a legislative process stained by the Veco bribery scandal.
But fixing what was done with the new oil tax recipe and channeling the mighty water generated by the tsunami of oil tax scandal and oil tax revenue disappointments is far more difficult than campaign sloganeering and finger-pointing. The difficulty becomes obvious as we parse the new governor's conceptual oil tax solution. Her irrigation plan for the wall of water she helped generated during her campaign and afterward about the PPT, raises some very basic questions.
So, as the legislature prepares to take up her oil tax irrigation blueprint, Alaskans who I believe were hosed by last year's PPT, need to ask:
Why her tax plan raises even less at every price point for a barrel of oil than was promised in last year's tainted PPT tax?
Why she lowers the tax progressivity factor from .25 percent to .2 percent (progressivity allows us, the oil owner, to at least partially share the economic benefit as the commodity price claws skyward)?
What facts convinced her to change from supporting a simple gross tax (which is more difficult for the multi-nationals to 'game') to a hybrid with many more complicated moving pieces?
Exactly where were last year's legislative consultants wrong when they testified the PPT, which was supposed to raise even more money than the governor's new proposal, still taxed at less than the prevailing tax rates in many comparable oil regimes? and
How do we fix the conundrum that the governor's tax credits may not adequately spur exploration and production investments by small, independent, explorers who may hesitate to explore, not because of taxes, but because the huge multi-nationals control access to the facilities needed for the independents to produce and monetize what they find?
In a recent op-ed piece published around the state, the commissioners of the Department of Revenue and Department of Natural Resources said the governor gave them three principles by which to judge any new oil tax options: transparency; provide a fair share of revenue to the state; and create an attractive investment climate for new oil and gas explorers. I agree with those mandates the governor gave her cabinet members but am puzzled by the outcome they reached.
Given the articulated principles, exactly how did they get to a plan that collects less than was promised in the PPT, is less transparent than a mostly gross tax (with an allowance for heavy oil and a few other challenges) because of all the moving parts embodied in her tax on profits, and doesn't solve the facility access challenges faced by new explorers.
Lacking good answers, the
best outcome of the looming special session may be to fix some
of the more egregious leaks in the PPT (like the provision that
allows tax deductions for the costs of BP's oil field maintenance
negligence) while she improves her irrigation blueprint.
Received October 05, 2007 - Published October 07, 2007
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