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Budget focus for Legislature
Allen Baker PNA Contributing Writer
With all eyes on Alaska’s budget gap, legislators and lobbyists expect very little in the way of other oil industry bills.
“The biggest concern for us and much of the industry is what the state does about the budget shortfall,” said Paul Laird of BP Exploration (Alaska) Inc.
“All of our focus will be on the budget,” echoed Karen Cowart, general manager of the Alaska Support Industry Alliance. “We have to present this state in fiscal order to potential investors.” AOGA interested in streamlining permitting process One issue that may be addressed is streamlining the permitting process, said Judy Brady, executive director of the Alaska Oil and Gas Association.
“You can’t do anything about prices — which is the driver,” said Brady. “You can do something about process.”
Permitting requirements added as a result of the federal Coastal Zone Management Act mean the industry faces “a very complicated review process every step of the way,” she said. “When you have actions that have to be reviewed three or four times, it just adds to everything else.” Alaska is the only state with such a dual permitting process, she said.
“There’s a big difference between having a reputation as a state with good strong environmental standards and having a process that becomes convoluted. We don’t have that reputation yet — we have to make sure it doesn’t happen.
“We’ve talked to the administration and the legislative leadership about a joint overview of the permitting system in Alaska,” Brady said. But even so, no actual legislation on the matter is likely this session. Fiscal policy focus for RDC Ken Freeman of the Resource Development Council agreed that regulatory reform might be on the horizon. His organization is also watching to make sure fees aren’t raised too high as the Legislature cuts state support to the agencies regulating industry. “That’s an issue we’re keeping an eye on as far as the impact on all industries,” he said. But RDC’s focus, he said, is on the state’s fiscal policy.
In some oil producing states, notably Oklahoma, there has been discussion of financial incentives in the wake of low oil prices. But that’s not likely to be coming up in Alaska this session.
It would be tricky to propose incentives, said Anchorage Republican Rep. Joe Green, the new majority leader in the House.
“It would kick up such a firestorm because you’d be saying we need money for our budget — but then we need to give some of it away,” he said. If prices remain low, incentives could come up for discussion next year. “If we just let that sucker (the oil industry) dry up, then there will be a problem,” he noted.
Brady of AOGA said her organization wasn’t promoting any royalty incentives or other tax breaks.
“Everybody looks to see where we are competitively as a state. I think they’ve found we’re somewhere in the middle,” Brady said. “One of the things we are going to look at is how the incentives the Legislature has approved in the past have been used.”
In Oklahoma, legislators may cut or eliminate a 7 percent gross production tax on oil producers. That state has lost about 5,000 jobs as 25 to 35 percent of its wells have been shut down. And New Mexico’s legislators have been asked to consider a relief bill.
But other producer states aren’t facing the kind of impact on their budgets Alaskans must ponder. A decade ago, Louisiana got more than 40 percent of its general fund revenue from severance taxes. That figure is now in the range of 9 to 16 percent. For Alaska, oil revenues provide upwards of 75 percent of state revenues. No new gas legislation expected Despite the low-price environment, a project team looking at a natural gas pipeline is still doing its work — but it’s not expected to ask for any legislation this session, said Ronnie Chappell at ARCO Alaska Inc.
Last year, the Legislature approved a measure giving the revenue commissioner broad powers to negotiate tax deals with investors to encourage construction of the pipeline, and a five-company partnership was formed last summer to begin studying pipeline issues. That work hasn’t slowed.
“The North Slope (gas pipeline) sponsor group is proceeding as planned. We have had no change to our budgets,” said David Lawrence, chairman of the consortium.
As for the budget issue, ARCO executives have been “encouraged that the Legislature and administration have been working to control state spending in recent years. We’re encouraged that that will continue,” Chappell said. Increased motor fuel tax expected to generate debate There is one proposal related to the industry hasn’t gotten much attention so far — Gov. Tony Knowles’ proposal to more than double the state’s motor fuel tax to 17 cents a gallon from 8 cents to provide matching money for more than $2 billion in federal highway money over the next five years.
“We don’t have a position on that,” said Brady of AOGA, whose members include the state’s two refiners. Others in the industry also weren’t taking a stand.
In the Legislature, Rep. Green said he thought the tax would generate a lot of debate because some lawmakers are worried that the revenue could end up being used to support the general fund instead of highway work.
“How can we be sure this is going to be beneficial — not sucked off for another use?”
The Associated Press contributed to this story.
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