PPT review in the works

To take hard look at new oil tax, administration needs info unavailable until April

Kristen Nelson

Petroleum News

There has been discussion of a special session of the Alaska Legislature this fall to review the petroleum profits tax that was passed by the last Legislature in August 2006. PPT was linked to the gas pipeline contract negotiated by the Murkowski administration with the North Slope producers, a contract which failed to win legislative approval.

Oil taxes are not linked to the Alaska Gasline Inducement Act proposal.

“Oil taxes and a gas line are two separate issues,” Alaska Gov. Sarah Palin said July 3.

But because three legislators who participated in the 2006 session have been accused of accepting bribes in association with PPT, the administration and legislators have discussed a special session to revisit PPT.

Palin said the administration would have its hands full if a fall special session on PPT were held because AGIA applications are due Oct. 1. That deadline triggers a 60-day public review and an evaluation of applications by both the Department of Natural Resources and the Department of Revenue and a review of which application would maximize value to the state.

Pat Galvin, commissioner of Revenue, said there is potential for overlap in evaluating the applications under AGIA and revisiting PPT, but in spite of that “we still recognize the need for trying to address PPT issues given the political cloud that hangs over it and we are looking for the timeframe that would be most effective.”

Getting information about how PPT is working is one problem, Galvin said. The only information the state has received was with true-up payments in April. “Since then all we’ve received are checks.”

That is the way the tax system was designed, he said, but it is frustrating for Revenue in trying to determine what costs are being deducted and what those costs represent. The department is trying to predict for the rest of this year and into next year what receipts will be from PPT “and a big part of that is going to be what those costs are and we’re not going to get that information, literally, until April.”

The lack of information is one area of concern, Galvin said: “We’re working with the taxpayers to try to get them to voluntarily provide us with information to help us in that assessment.”

Palin said the administration has committed to legislators that it won’t “lead them into something blindly. We want to have as much information as possible” and also give legislators lead time to consider whatever the administration presents.

The governor said that with 90-day legislative sessions starting in 2008, legislators are concerned that with an AGIA license to approve it would be too much to also have PPT in the regular session. That, she said, is the thinking behind holding a special session on PPT, “if we have enough information to present to them.”