Group seeks oil tax changes; industry warns of reduced investment
A group including an Anchorage attorney, a former tax division director and former state lawmakers, believe Alaska’s oil tax system favors the industry and wants it changed through a ballot initiative.
The group said the state is not getting its fair share largely because of a per-barrel deduction it believes is overly generous, especially at a time when the state is running annual billion-plus deficits.
It would be the second ballot initiative since the system, known as Senate Bill 21, was passed by lawmakers in 2013. A 2014 effort failed.
Still, the group believes the law ushered under former Gov. Sean Parnell has failed to meet expectations of putting more oil in the Trans-Alaska Pipeline System.
“Senate Bill 21 is an abject failure for Alaskans,” said Anchorage attorney Robin Brena at a news conference laying out the group’s case. “It is giving away massive tax breaks for no particular reason.”
The proposed new law is called the Fair Share Act and includes:
- Applying changes to larger North Slope fields that produce a minimum 40,000 barrels daily over the most recent calendar year and 400 million cumulatively;
- Increasing the gross minimum production tax for these larger fields from 4% to 10% while increasing the 10% minimum by 1% (up to a maximum of 15%) for every $5 increase above $50 per barrel;
- Eliminating the $8 per barrel credit starting at $50 per barrel and adds an additional 15% tax on producers’ profits beginning at $50 per barrel of profit.
The group says had the proposed changes been in place, it would have been worth $1.1 billion to the state and made it easier to fund essential state services.
“We are paying the producers to produce our oil from the large and profitable legacy fields,” Brena said. “This is ridiculous.”
But the Alaska Oil and Gas Association’s executive director Kara Moriarty refutes the claims, saying the industry contributes with production, corporate and property taxes in addition to royalty payments. This, Moriarty says, amounts to about $2.7 billion collectively paid to the state.
“To say that the state is paying oil companies to produce oil would suggest that we’re not paying anything in royalties or production tax or corporate income tax or property tax,” she said. “And we’re doing all of those.”
Moriarty added significant tax changes such as those proposed would have a chilling effect on investment at a time when the state sorely needs the industry to continue exploring.
“It does put current investment at risk and it puts new investment at risk,” she said, “and it jeopardizes the health and success of 90% of our current production.”
Initiative backers would need more than 28,000 certified signatures from registered voters statewide to get on next year’s ballot.
Alaska’s Senate Democrats have long said an adjustment to the state’s oil taxes is one part of a solution to the state’s ongoing fiscal crisis.
Sen. Bill Wielechowski, D-Anchorage, sponsored SB 12, which would repeal the per barrel tax credit.
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