Photo by Sam Harrel / News-Miner. Bruce Tangeman, Deputy Commissioner of the Alaska Department of Revenue, points out a slide as he speaks during the Greater Fairbanks Chamber of Commerce luncheon on Tuesday, Jan. 8, 2013, at the Carlson Center. He said Parnell plans to introduce a revamped proposal to the Legislature next week that include reforms of both the state's tax rates and investment incentives. He didn't provide specific details of the legislation, but said its reach would be broader than his previous plans.
FAIRBANKS — Gov. Sean Parnell plans to offer a new approach to boosting Alaska oil production this year, expanding his focus during the upcoming Legislative session to include reform of both the state’s tax rates and investment incentives.
Addressing a two-decade decline in oil production has been Parnell’s top priority during each of the past two years, but his efforts haven’t made it past the Legislature.
They’ve been directed primarily at lowering oil royalty taxes, a move Parnell has argued is necessary to make the state competitive with other oil-producing areas.
Bruce Tangeman, deputy commissioner of the Alaska Department of Revenue, said Parnell plans to introduce a revamped proposal to the Legislature next week. He didn’t provide specific details of the bill, but said its reach would be broader than previous plans.
Tangeman, who spoke at the Greater Fairbanks Chamber of Commerce luncheon Tuesday, said there is a growing realization that the system of tax credits the state offers for investment also needs to be overhauled. The state has invested more than $4 billion in tax credits during the past five years.
The system currently offers a 45 percent tax credit on some oil exploration investments, whether those efforts lead to oil production or not. Tangeman hinted that the new bill will change that, providing credits only for developments that provide new sources of oil.
“We’re concentrating on re-balancing the system,” Tangeman said.
Parnell’s old proposals for oil tax reform were criticized by opponents for draining billions of dollars in state tax revenue without guarantees that the lower rates lead to more production. After Revenue Commissioner Bryan Butcher struggled to answer questions about the tax bill during a Senate hearing last spring, Parnell pulled it from consideration.
Tangeman said new consultants were brought in this summer to take a fresh look at the issue. He said Parnell will aim for a system that encourages new production while being fair, simple and durable for long-term investment.
Tangeman said recent trends are becoming “more and more depressing,” displaying a graph during the luncheon that showed production spikes in areas like North Dakota, Texas and Alberta, while oil extracted in Alaska has gradually declined. He said oil companies are simply finding more attractive places to invest their money.
“We, as a state, need to realize this is a competition and we need to get back in the game,” he said.
Tangeman said a new tax system is needed to take advantage of new technology for removing shale oil. It’s expensive to extract, which makes areas with high tax rates unattractive for shale production.
He said, however, that Parnell’s proposal still will use the basic framework of the current oil tax system, to which both the state and oil companies have grown accustomed.
“We didn’t enter this process with the idea of throwing the baby out with the bath water,” he said.
Contact Fairbanks Daily News-Miner staff writer Jeff Richardson at 907-459-7518.
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let me scam you this way now... said on Wednesday, Jan 9 at 8:52 AM
in other words, when circumstances change for some it makes him think he has a mile...but in reality he does not...it just makes for evidence of his tactics that mimic our "grifter" governor we had before... car salesman Sean - that is the job for you indeed! you cannot bamboolze the folks of Alaska anymore...the gig is up...I mean with all your Illegal Activities within the Alaska National Guard and all...so how is that Sex Club going?
110931781Who will blink first said on Wednesday, Jan 9 at 4:04 PM
It is a staring contest between the oil companies and our state government and with our spineless governor he will blink and give the world to the oil companies. I guess he was a hell of a great lawyer to the oil companies in the past "Conoco Phillips" Say good bye for a second term Sean
110963382Anonymous said on Sunday, Jan 13 at 4:40 PM
I hope CIRI steps in and recalls that their peoples did occupy the land before white man and his BS showed up...might bring some stink to that stare down lol...
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