House bill reignites longstanding oil tax debate
The House Resources Committee kicked off its first hearing this legislative session with predictable discussion: oil taxes.
House Resources Co-chair Geran Tarr (D-Anchorage) wants to increase the minimum rate from 4 percent to 7 percent when prices are above $25 a barrel.
If passed by both chambers, the bill could be worth as much as $255 million to the state’s coffers annually, according to a Department of Revenue analysis.
For example, when the market price for North Slope oil hits $60 per barrel, the state receives about $2 per barrel.
Under Tarr’s proposal – HB 288 – a $60 per barrel market price would generate $3.55 a barrel for the state.
According to a Department of Revenue December report, petroleum revenue was responsible for 65 percent of the state’s unrestricted revenue during the 2017 fiscal year, which ended June 30, 2017.
Current prices for North Slope oil have been inching closer to $70 a barrel in recent weeks. On Friday, it closed at $68.70.
Tarr told the panel her bill falls into a bigger picture plan toward closing the $2.5 billion budget gap and is “a conversation starter”.
“I hope (it’s) something we’ll think about as we try to address our fiscal challenges and this deficit,” Tarr said.
Tarr’s offering quickly generated pushback from minority Republicans questioning whether the bill will have a chilling effect on long-term investment.
David Talerico (R-Healey) said he’ll continue to ask how any tax bill affects production volume, future exploration, and overall future investment.
He also wants to make sure there are no “creative amendments” that could send the bill down a path away from its original intent.
“I do hope that as we move forward on this – and you’ve tried to limit this to one particular subject. – that others don’t get incredibly creative,” said Talerico, a former resources committee co-chair. “I will keep my fingers crossed.”
Oil tax bills seem to be a Legislative fixture with new proposals being introduced almost yearly since the state switched from a gross tax to a net profits tax under former Gov. Frank Murkowski in 2006.
Just last year, lawmakers approved a bill that restructured an oil tax credit program, ending upfront exploration payments. Instead, oil companies receive investment credits once they begin producing oil.
The state could afford the old plan of making cash payments when oil prices consistently hovered over $100 a barrel, but since Walker took office in December 2014, oil has gone as low as $30 a barrel.
The state is still on the hook for about $1 billion in credits owed. A plan to pay off those obligations is forthcoming, Revenue Commissioner Sheldon Fisher told the Senate Resources Committee in during a morning hearing.
Committee co-chair Andy Josephson (D-Anchorage), who conducted Monday’s hearing, said bill discussions will continue on Friday with testimony from Gov. Walker’s administration and members of the industry.
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