|
Oil tax committee plan dies on last night of Alaska legislative session
Larry Persily Petroleum News government affairs editor
The Alaska House and Senate disagreed on a proposed study of the state’s oil and gas tax and royalty structure, killing off an effort to look at Alaska’s competitiveness for worldwide investment dollars and whether the state is getting its fair share at high oil prices.
House members had voted overwhelmingly to set up a special joint committee to look at the issues during the interim and report back to lawmakers for the 2005 session. But the Senate dropped the provision for a special committee, reduced the work assignment and eliminated funding for the effort.
The measure died on the last night of the session May 11, when disappointed House members refused to accept the Senate’s changes.
The measure’s sponsor, Rep. Cheryll Heinze, R-Anchorage, said House members wanted to show the public they are doing their job by responding to people’s questions about whether the state is getting its fair share of oil revenues when crude is selling in the upper $30-per-barrel range.
And the House also wanted to show the oil and gas industry that lawmakers are aware of the high costs of doing business in the state and the need to remain competitive at attracting investment dollars for exploration and production, especially when oil prices are low. “We were trying to be proactive” she said.
“This (industry) is 85 percent of our tax base,” Heinze said, and is worthy of a thorough and comprehensive review by a special committee and international consultants to determine if Alaska is doing the best it can. Not intended as a tax increase committee The House did not view the undertaking as a tax increase committee, as opponents feared, Heinze said.
Whatever the House intended, the industry came out strongly against the bill.
House Concurrent Resolution 39 passed the House on a 32-5 vote May 7, less than 48 hours after it was introduced to lawmakers. The Senate Resources Committee three days later rewrote the measure, which passed the Senate 16-4 on the Legislature’s final day but the House — with 38 minutes left before the midnight adjournment deadline — voted 19-20 to reject the Senate version and the measure died.
Heinze, a freshman lawmaker, said the joint committee also was part of the end-of-session deal that House Republican leaders offered minority Democrats to gain their support for budget votes. The Democrats have been pushing for changes in the state’s oil and gas production tax formula to give the state a larger slice when prices are high.
Representatives of the Alaska Oil & Gas Association, Resource Development Council of Alaska and Alaska Support Industry Alliance testified against the measure in the Senate committee. Proposal worried industry “This is causing a lot of telephone calls back and forth,” and is sending a bad message to the industry, said Judy Brady, executive director of the oil and gas association.
“HCR39 singles out the oil and gas industry,” said Larry Houle, general manager of the Alliance.
After adopting the amended resolution, Senate Resources Committee Chair Scott Ogan said he would eliminate the $575,000 in state money requested for one staff member and consultants for the proposed Alaska Royalty and Revenue Committee.
“The chairman will zero out the fiscal note,” the Palmer Republican said of the funding request. “It’s my prerogative as chairman sometimes.”
The committee version would have assigned the job to the Legislature’s Budget and Audit Committee, without the instructions requested by the House that the special committee hold public hearings and, if necessary, have the ability to review confidential information.
Though the legislative resolution failed to pass, the Budget and Audit Committee voted May 18 to spend up to $50,000 to purchase a consultant’s report expected later this year on the economics of exploration for oil and gas in more than 60 countries and Alaska. Lawmakers subscribe to Wood Mackenzie report The report, by global oil and gas consulting firm Wood Mackenzie Ltd., will look at upstream economics, exploration success rates, average discovery sizes, finding and development costs and government takes. It will be an update of a similar 2002 report.
“It’s good timing for the Legislature to be looking at those issues,” said Committee Chair Rep. Ralph Samuels, R-Anchorage.
Meanwhile, the Alaska Department of Revenue continues its review of the state’s oil and gas production tax incentive called the Economic Limit Factor, or ELF, intended to reduce taxes on smaller or older fields. Dan Dickinson, director of the Tax Division, told legislators last month the governor had asked the department to review the tax formula.
“You look at the ELF formula and you ask, is it perfect?” Dickinson said in an interview last month. “Does it strike the exact right balance?” he asked, between encouraging future development and providing a fair share of revenues to the state.
He declined to provide specific details of the Tax Division’s ongoing review of the production tax formula.
| 