Legislature ends cashable oil tax credit program
In an eleventh-hour compromise, the Alaska legislature voted Saturday night to end the state’s cash credit program designed to incentivize exploration for oil by smaller companies.
The Senate approved a conference committee’s version of House Bill 111 just before 11 p.m. on day 180 of session. The House followed suit, just before the clock ran out on the legislature’s second special session at midnight.
The measure builds upon the previous legislature’s work through HB 247, which ended cashable credits only in the Cook Inlet region.
– eliminates cashable credits throughout the state retroactively, effective July 1, 2017.
– Requires companies reach production in order to deduct losses from future tax liability, and sets a time limit in which to do so.
– Creates a working group to continue evaluating the state’s oil tax system during the interim.
“If you didn’t get everything you wanted in this bill, that’s not an exclusive club,” Rep. Geran Tarr (D-Anchorage), chair of the conference committee tasked with working out the House and Senate’s differences on the measure, told colleagues on the House floor. “It went farther than a lot of people wanted, and not as far as some others did. So, it truly does represent a compromise.”
Tarr described the final version of the bill as maintaining the status quo besides repeal of the cash credits. But Tarr’s Senate counterpart, Sen. Cathy Giessel (R-Anchorage), viewed the legislature’s action differently.
“One thing I want to make clear, nothing replaces cash as far as an incentive to come here and produce our resources, thus creating good paying jobs,” Giessel told reporters Saturday. “Make no mistake about it, this bill is a tax increase.”
The Alaska Oil and Gas Association was quick to criticize the measure.
“Make no mistake: HB 111 will cause companies to rethink their investment strategy in Alaska, meaning they will likely spend less money and employ fewer Alaskans. With the state mired in an economic recession, these actions will hurt,” said AOGA President and CEO Kara Moriarty, in a press release, just minutes after the bill’s passage.
“Enough is enough. If this bill is signed into law, the oil industry, which remains, by far, the largest contributor to the State’s unrestricted revenues, will be giving even more,” Moriarty said. “We will have ‘chipped in’ toward solving Alaska’s deficit, despite having financial challenges of our own due to a prolonged period of low oil prices. If Alaskans want to see exciting new oil fields developed and new oil flowing through the pipeline, then fiscal stability must be established in Alaska. The constant moving of the goalposts and continued failure to fully reimburse companies for earned tax credits is not only frustrating, but makes Alaska’s chances of attracting desperately needed investment worse with each passing year.”
Gov. Bill Walker must sign HB 111 before it becomes law.
In a press release Saturday night, Walker praised lawmakers for passage of the measure.
“I commend members of the legislature for coming together in the spirit of compromise to eliminate unaffordable cash payments to oil companies,” Walker said. “This is a meaningful step to help shore up our financial situation. I thank Representatives Geran Tarr and Andy Josephson, and Senator Cathy Giessel for leading negotiations to bring each body to this compromise deal. However, the work is not yet finished. Alaskans deserve a complete fiscal plan and economic stability for the future. I urge lawmakers to continue with this spirit of compromise and collaboration, and pull together to fix Alaska.”
The legislature has yet to pass a capital budget to fund state projects. Walker said he will wait to call lawmakers back into session until an agreement on that bill has been reached.
“The state does not need to spend thousands of dollars in daily expenses simply for the parties to negotiate,” Walker said. “I have been assured, however, that legislators will reach a compromise in time to pass a capital budget before July 31. Once a deal is reached, I will immediately call them back into session.”