How much will oil tax bring? Nobody knows Estimates on revenues from production profits tax depend on what price, development cost numbers consultants use in models Matt Volz Associated Press Writer
Nobody really knows how much extra cash a proposed oil tax would bring Alaska. But that hasn’t stopped the guessing.
Each new version of the petroleum production tax bill is quickly followed by estimates from consultants for both Gov. Frank Murkowski and the Legislature on how much tax revenue it would produce.
One says that at $60 a barrel, the state’s take will average $1.6 billion a year above what the state collects now over the next 10 years.
Another says the state take will be an average $1.4 billion a year more than the current system over the next six years at $60 per barrel.
They’re both wrong.
Legislative consultant Jim Eason warned state lawmakers not to believe anybody’s numbers. He passed on that advice back in March, when legislators were in the beginning throes of setting a proposed tax rate on the Alaska profits of oil companies.
“I don’t think it’s bad the numbers are wrong. I think it’s inevitable that the numbers are wrong,” Eason said then.
The problem is the cost assumptions. Nobody knows what the future oil prices will be, what the equipment will cost or how much will be invested to develop a field.
Murkowski’s consultants and economists plug in their own assumptions on how much companies will spend on exploration, on heavy oil, on the operational costs and the other estimates that go into the formula.
Murkowski consultant and former state tax director Dan Dickinson said the modeling has gotten better since the bill was originally introduced in February, but the results are still only estimates.
“We’re not any better at predicting the future than we were three months ago,” he said.
So while the assumption is that the state will take in hundreds of millions more a year when oil prices are high, nobody knows for certain exactly how much it will be.
Some legislators are concerned that the tax collected will be a lot less than anticipated because the lines are blurry on what costs the oil companies would be able to deduct or claim as credits.
A tax on gross production instead of net profits would eliminate the ability of the companies to manipulate the system, the critics of the net-profits tax say.
“When you shift to net, you’re creating theme parks for lawyers,” said Sen. Kim Elton, D-Juneau. “Is the purchase of a pickup truck to move personnel around in Anchorage, is that a cost that can be allocated to the North Slope? Maybe, maybe not.”
Supporters say there are two important factors that will keep the oil companies honest in reporting their taxes: federal tax reports and each other.
The state will have access to the companies’ federal income tax filings. Plus, oil companies who partner with other oil companies in fields like the massive Prudhoe Bay don’t trust each other and carefully scrutinize each others’ financial reports, supporters say.
|