Oil Industry Objects to Senate Finance Committee’s Tax Reform Bill
Producers say latest offer would discourage investment
ALASKA - With just days left in the legislative session, the oil industry came out against the latest version of tax reform being proposed by the Senate Finance Committee. The oil industry reacted Friday to the new version of tax reform drafted by the Senate Finance Committee, and denounced it as inadequate to attract new investment.
Senate Finance Co-Chair Bert Stedman (R-Sitka) says at oil prices of $100 per barrel, the bill now offers $277 million in annual relief from the production tax, versus the $1 billion offered under legislation offered by Governor Sean Parnell.
The three major producers have said they would invest $5 billion more over several years under Parnell’s bill.
But Stedman says that's meaningless.
"Until I see a letter with all three of them signing it, I don't think it's much of a commitment. So if somebody's got a commitment out there, I'd like to have it delivered to my office," Stedman said.
Department of Revenue Commissioner Brian Butcher said, "Ultimately I don't think we're going to know until it's passed or not. The question is are we going to pass a bill that is positively viewed as moving the needle or not."
"A tax structure could have been put in place that says you go back and get these commitments from your company to expend this money in this area, and the tax will then be effective at that point in time,” said Senator Joe Thomas (D-Fairbanks). “It's simply language to put things in place. And I think that's where we've all fallen short of trying to get a better understanding of what would take place."
Industry executives still support Governor Parnell’s original plan, which would reduce taxes between $1 billion and $2 billion per year, depending upon the price of oil.
An executive of BP Alaska warned that the committee's bill would create “misalignment” among the producers, who often must agree on new projects.
That misalignment, he said, would have the potential to drastically slow or even end activity on the North Slope.
The committee's bill would offer hundreds of millions less in relief.
"Senate Bill 192 – in particular the elements that incentivize or attempt to incentivize incremental production – are likely to create a misalignment between producers, and that misalignment, primarily driven by each producer having a different target, is likely to slow or potentially stop activity on the slope," said Damian Bilbao of BP Alaska.
Most observers at the capitol say it's unlikely the oil tax dispute can be resolved by the end of the 90-day session on April 15.