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Production tax hike moving
Kristen Nelson Petroleum News
An increase to a 25 percent tax base and aggressive progressivity are features of committee substitutes for Gov. Sarah Palin’s revision of the petroleum profits tax. Committee substitutes reached the Senate and House Finance committees Nov. 5 and Nov. 6, respectively.
The bill would amend the petroleum profits tax passed in 2006; that bill had a 22.5 percent tax rate and included progressivity — a tax increase based upon the price of crude oil.
Legislators are trying to balance a desire for more state revenue at times of high crude oil prices with the need to get more investment from oil and gas companies.
Both the Senate Judiciary and the House Resources committees relied on projections by consultants from Gaffney Cline that taxes based on the net can be aggressive and still allow companies positive investment returns from Alaska fields. Gaffney Cline told legislators that their model was based on in-field drilling at established fields, not more cost-challenged developments such as heavy oil.
The committee substitutes now being considered in the House and Senate Finance committees include the governor’s request for a 25 percent tax rate, although the 10 percent gross tax floor on legacy fields has been dropped.
With the absence of the gross tax floor, the administration has said revenues to tide the state over in the event of low oil prices would come from strong progressivity features. The House Resources version currently in House Finance is particularly strong since there is no cap on progressivity, something House Finance Co-Chair Mike Chenault, R-Nikiski, said the committee would consider.
In stakeholder comments Nov. 8, the North Slope’s largest producers — BP, ConocoPhillips and ExxonMobil — all told House Finance that the bill would have a negative impact on investment, and said the House Resources committee substitute would have a substantially more negative impact on investment than the governor’s proposal.
Bills moving rapidly The committees scheduled joint public testimony for the evening of Nov. 8.
Chenault said Nov. 7 that House Finance would probably be considering amendments on Saturday, Nov. 10, although both Chenault and Senate Finances Co-Chair Bert Stedman had earlier hoped to have the bills in committee discussion for amendments by Friday, Nov. 9.
The 30-day special session wraps up Nov. 16, and bill passage will require floor votes in both bodies and a conference committee to resolve any differences between House and Senate versions.
The bill which is passed first will become the vehicle for final passage.
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