Senate Finance Committee introduces rewrite of oil tax bill

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March 13, 2013

Alaska

By Alex Murray

JUNEAU, Alaska: The Finance Committee of the Alaska State Senate has presented a new version of a bill by Governor Sean Parnell (R) to revamp taxes on oil production.

As the Alaska's Clear and Equitable Share system stands, oil producers are taxed progressively based on prices; the current rate is 25 percent of company profits. The version of Senate Bill 21 being pushed by the Finance Committee would set a flat base rate of 30 percent, five percent less than an earlier proposal by the Resources Committee, but five percent more than Parnell's original plan.

The bill would also give a $5 credit for each barrel of oil produced, as well as maintain the current 20 percent tax break for new oil development, known as a gross revenue exclusion. However, the exclusion would also apply to new oil from already-developed "legacy" fields.[1][2]

Republicans contend that doing away with the progressive system will increase stability, encouraging new development and simplifying international trade.[3] Democrats argue that the Parnell plan would not necessarily bring increased production, and that tax breaks should come after new investment. Bill Wielechowski said that the bill represented a "giveaway" to existing producers such as BP, Exxon, and ConocoPhillips.

Industry figures had mixed opinions of the first two versions of the bill, praising the flat system, but not a base tax increase and a plan to limit the gross revenue exclusion to new fields. Legislative consultant Janak Meyer said that the Finance version would increase the state's competitiveness.[2]

Meanwhile, activist and former legislator Ray Metcalfe has said that in the event of the bill becoming law, he is readying an initiative for the 2014 ballot which would restore an altered version of the ACES system.

Democratic responses to Parnell's plan, including Senate Bill 50 and House Bill 111 have not received committee hearings one month after introduction.[4] Alaska is one of 24 Republican state government trifectas.

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