Alaska Gov. Bill Walker added House Bill 111, the oil credit and tax bill, to his special session call June 22, but as this issue went to press the House and Senate, which have passed very different versions of the bill, seem far from agreement. Conference committee members were appointed in late May and early June, but the committee, chaired by the House since this is a House bill, met only once during the first special session, June 9, with members voting - along caucus lines - against both the House and Senate versions.
After the budget was passed the governor added HB 111 to his call for the second special session, but legislative records record no conference committee action.
Senate leadership told the press June 29 that a compromise bill was being drafted to end cash payments.
Sen. Cathy Giessel, R-Anchorage, chair of the Senate Resources Committee, and Senate chair for the conference committee, said the governor’s ringfencing proposal and interest rates were also up for discussion.
House Resources Committee co-chairs Rep. Geran Tarr and Rep. Andy Josephson, both Anchorage Democrats, said in a statement the same day that flaws in the state’s oil tax system were bigger than just cash for credits, and said the House Majority Coalition welcomed a renewed focus on oil taxes, but also said the Senate was refusing to consider other provisions in the version of HB 111 passed by the House.
Compromise?
While Giessel said she had drafted a resolution based on the Senate agreement and that Tarr, who is chair of the HB 111 conference committee, was looking it over, the response from Tarr and Josephson was not positive.
“We continue to see a kick the can approach from our colleagues in the Senate Majority on this and other fiscal plan measures,” Tarr said.
“This new Senate Majority proposal is a half-measure that continues a flawed system that leaves Alaska on the hook covering potentially billions in industry losses for years to come,” Tarr said, adding that while she looks forward to working with Giessel, “the proposal they unveiled today does not address the underlying problem of costs to the state.”
Cash payment issue
In introducing the Senate proposal, Senate President Pete Kelly, R-Fairbanks, said in a statement that the Senate believes “it is urgent to pass legislation ending these cash payments.”
“The state will bleed at least one million dollars per day between now and the end of the year - that could pay for seven troopers for an entire year - unless we act now,” he said.
Giessel said that under the Senate compromise proposal the state would stop offering cash payments for credits beginning July 1 of this year, and said that stopping “this cash bleed” would save the state “at least $200 million between now and Dec. 31 - possibly more.”
The ringfencing proposal would link losses on a lease to that lease until the lease enters production, Giessel said. After production begins, losses could be applied against the taxpayer’s production on the North Slope or in Cook Inlet.
The carry forward issue
“I can’t support the Senate Majority’s new proposal because they essentially are just changing the name of the liability but the state will still pay the same to the oil companies,” Josephson said. Under the Senate proposal companies would be allowed to carry forward losses, which would be deductible from production and other taxes.
The House version of HB 111 makes multiple changes in the state’s oil and gas tax regime, including increasing oil taxes.
Senate majority members have argued that a substantial rewrite of oil tax requires more analysis than is available this year, and argue for waiting until consultants recently hired by the Legislature have time to complete models and assess potential impacts of tax changes.
