Friday, January 27, 2012

Senate’s oil tax bill ready in less than two weeks, Senate President says

Tim Bradner
Alaska Journal of Commerce

JUNEAU —­ Senate President Gary Stevens, R-Kodiak, says the Senate’s version of an oil tax reform bill is being drafted and will be before the Senate Resources Committee within two weeks.

Stevens spoke in a briefing by Senate leaders held in Juneau Thursday.

The oil tax change is considered one of the key issues to be resolved by the Legislature in its 2012 session. “It’s the elephant in the room,” Stevens said.

Gov. Sean Parnell said the state needs to adjust taxes to encourage more oil industry investment on the North Slope, where production is now declining.

After the Resources Committee finishes its work the bill will go to the Senate Finance Committee, then to the floor of the Senate and the state House, which passed its own version of oil tax changes last year.

That bill, House Bill 110, had been introduced by the governor, and is now in the Senate Labor and Commerce Committee. Stevens said the pending new Senate bill will be the “vehicle” for resolving the issue rather than the House bill.

“Our goal is to get it to the House with 30 days left in the session, the give House members time to review the proposal,” Stevens said.

That timetable would have the bill to the House by mid-March. Stevens said some conversations have been held already with House Speaker Mike Chenault.

Senators in the Thursday briefing, which included co-chairs of the Senate Resources and Finance committees, would not comment on contents of the bill being prepared but said it would deal with problems in the “progressivity” formula in the current tax law as well as investment tax credits and tax audit procedures.

The progressivity formula is the source of many problems, oil producers have said, because it sharply ratchets up the state tax rate when oil prices climb. At current oil prices, the tax rate is among the highest in the world. Given the high costs of developing new oil on the Slope and the expected modest-sized discoveries, Alaska is now having trouble being competitive in attracting investment, the companies have said previously.

Stevens said there was agreement in the Senate majority that action is needed to get more oil into the Trans-Alaska Pipeline System, which is moving smaller amounts of oil with the decline of production in the North Slope oil fields.

However, the approach being developed in the Senate is “far apart” from the approach taken by the governor and the House in HB 110, Stevens said. Stedman said the two versions of the tax change would be closer than many expect because there is agreement on the problem areas in the tax.

“People agree on the choke points. What we have to agree on is the policy changes needed to fix them,” Stedman said in the briefing.

Stedman said one focus of the Senate bill will be on the split of production profits at different crude oil price ranges between the state and the producing companies.

Sen. Joe Paskvan, D-Fairbanks, co-chair of the Resources Committee, said legislators now have far more information about the need for a tax change than was available a year ago, when HB 110 passed the House.

“I now have 100 pages of answers to my questions from the Department of Revenue and 25 pages of answers from the Department of Natural Resources,” Paskvan said.

Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/AJOC-January-29-2012/Senates-oil-tax-bill-ready-in-less-than-two-weeks-Senate-President-says/#ixzz1kiGv2F7M