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Ted Stevens: focus on investment climate Administration calls for return to original production profits tax bill; Ben Stevens says he opposes committee substitute Kristen Nelson Petroleum News
The battle in Juneau over appropriate changes to production tax rates took an interesting turn the week of March 20, with Sen. Ben Stevens, R-Anchorage, noting in a meeting of Senate Resources March 22 that he opposes the committee substitute, and his father, U.S. Sen. Ted Stevens, R-Alaska, telling legislators that he thinks the focus should be on the investment climate.
The senior Stevens said in his address to the Alaska Legislature earlier March 22 that there must be a favorable climate for investment in Alaska, and noted that what happens in the state Legislature impacts both development within the state and what happens in Washington, D.C.
On the D.C. side of the equation Stevens told legislators that the state has few friends in Washington, where the feeling is one of why should the federal government send money to Alaska when Alaska is not willing to put its own money into projects. Others, he said, believe the state already gets too much federal aid. The state’s economic potential is extraordinary, Stevens said, with two-thirds of the nation’s outer continental shelf, gas hydrates and half of the nation’s coal.
With the potential of the gas pipeline, the Arctic National Wildlife Refuge, the OCS and the National Petroleum Reserve-Alaska, the state needs to proceed carefully, he said, because each involves federal land.
He also said the state competes with many areas of the world for resource development and there must be a favorable climate for investment in the state. Transition provisions crucial Asked about his views on the production profits tax in a press conference after his address to the Legislature, Stevens said he believes the focus should be on the investment climate in Alaska. He said he thinks that elimination of the transition provisions which the governor proposed as part of the production profits tax was particularly damaging.
Under the governor’s proposal companies would have been allowed credit for investments made over the last five years when there was the expectation that fields developed, like the Fiord and Nanuq satellites, would pay no severance tax.
Stevens said the state will need investment for development of NPR-A, the gas pipeline, ANWR and the OCS, all of which will bring the state a lot of money.
The job of the Alaska Legislature, he said, is to create a favorable climate for investment in those projects. He said he hoped the Legislature wouldn’t “nickel and dime this process” that it’s going through with the oil tax and the gas pipeline.
He said the existing severance tax system with its economic limit factor, or ELF, worked to bring investment money to enhance development.
Industry has agreed that with oil prices so high there should be taxes in place of ELF, he said, but the industry made recent investments from which the state will get income, and industry would like to recover those investments.
“I think that is perfectly normal and perfectly proper” and that the state should create the climate for investment so that people will put up money to develop Alaska prospects, he said. Rubber stamping not expected Stevens said he doesn’t think anyone expects 60 legislators would take the “good piece of work” that the governor and industry put together and rubberstamp it. But making changes is one thing, he said, throwing it out and starting all over again is another thing. And the suggestion of some legislators that they should act without any respect to the producers hurts the investment climate, he said.
The opportunities Alaska has for development — the gas pipeline, NPR-A, OCS and ANWR — are investment heavy, he said, and the state competes for investment with opportunities elsewhere in the world.
He said he believes a new tax bill must be fair to people who have already made investments. ConocoPhillips, he said, has made over half the investments that would be affected. They are also the company who urged the governor to move the gas pipeline. They’ve provided the momentum and they’re going to be punished more by elimination of the transition provisions, Stevens said.
He said he wasn’t urging the Legislature to rubberstamp but to be fair.
Remember, he said, we’re asking industry to invest in ANWR, NPR-A and the OCS. There are plenty of opportunities elsewhere for investments. Alaska gives them the advantage of being under the American flag and they’d really rather be here if the investment climate is right, but, Stevens said, they really don’t need to be here to make a profit. Ben Stevens opposes Senate Resources CS Senate Resources took up amendments to its committee substitute for Senate Bill 305 the afternoon of March 22 and Ben Stevens said he objected to moving the working draft. “I don’t agree with rates proposed” in the committee substitute, Stevens said.
The committee adopted its working draft, which raises the tax rate to 25 percent (from 20 percent in the administration’s bill), reduces the transition provisions and adds a progressive tax on top of the PPT.
Stevens also joined Sen. Ralph Seekins, R-Fairbanks, in objecting to making the tax effective April 1. Seekins said a retroactive tax was “not fair,” and said he would have trouble voting for any tax that is retroactive to before the bill passes.
The committee worked March 22 on adopting technical amendments.
Senate Resources Chair Tom Wagoner, R-Kenai, said he hoped to have a completed working bill back from drafters by the end of the day Friday, March 24. Governor: goal of tax long-term Gov. Frank Murkowski told members of the press March 23 that he thought Sen. Ted Stevens’ support of the PPT was evident from his remarks to the Legislature.
He encouraged legislators to recognize that the “objective is not to get the highest maximum tax on oil.” That is not, the governor said, what we negotiated. What was negotiated, about twice what industry is currently paying, was a “fair tax rate” along with incentives to stimulate exploration and stimulate getting more oil production, as well as incentives for smaller oil companies.
He said the PPT as proposed will “maximize returns to Alaska ... in the long run.”
And, he added “you don’t tax your way to a gas line.” The assumption in a negotiation, he said, is that both sides are somewhat satisfied but not completely.
The administration negotiated with the oil companies, he said. The Legislature is now working on the proposal industry accepted.
If the bill that comes out of the Legislature is within the realm of the 20 percent tax rate, we’ll move to the gas contract.
The governor said he can’t speak for what industry will be willing to accept: If it fails, he said, it will be because the agreement which was basically accepted has been violated to a degree to which it’s no longer acceptable.
If we don’t get a favorable PPT, the gas line is a moot point and what we walk out with is a tax on oil, Murkowski said.
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