Wednesday, January 30, 2013

Reasons why we need to look at Alaska's oil tax code revisions

Steve Pratt
CEA Ak Testimony
Special Senate Committee on TAPS Throughput
January 29, 2013

Thank you, Chairmen for allowing public comment on tax reform. My name is Steve Pratt, Executive Director of Consumer Energy Alaska, a regional chapter affiliated with the national Consumer Energy Alliance. We believe there are several reasons why we need to look at tax code revisions:

Business and residential consumers of energy have a direct interest in consuming competitively priced energy supplied from domestic sources, and also have a direct interest in robust overall economic activity to maintain livelihoods.

30% of Alaskans are dependent upon oil and gas exploration and development for employment.

Oil production has declined from a peak of over 2 million barrels a day to a little over 500 thousand barrels a day and is in freefall at the rate of 5 - 7% per year during times of increasing oil prices.

Alaska is capable of providing a great deal more of total domestic oil production in the United States.

Alaska’s abundant natural resources and oil production are vital to the energy security of the entire nation as well as the state.

New exploratory and development drilling is both a risky enterprise and necessary to stem the decline in Alaska oil production.

New oil exploration and development in Alaska needs to compete globally for investment dollars.

The rates and progressivity structure of Alaska’s current tax regime provide a disincentive to attracting risk capital to the state as evidenced by declining production during times of high oil prices. Increased prices have resulted in substantial increases in oil production in other locations around the United States, but not in Alaska, and not because more oil is not available.

Increased investment through increased global competitiveness will enhance Alaska’s ability to fulfill its constitutional mandate to develop natural resources for the maximum benefit of the people.

Alaska’s remoteness from the markets, Arctic climate, high labor and logistical costs argue for a more competitive tax and regulatory structure.

Consumer Energy Alliance – Alaska is in favor of the Alaska State Legislature reviewing and approving revisions to the Alaska Tax Code that would improve the investment climate in Alaska.

Something is terribly wrong and I thank you for taking on the task, with the Governor, of coming up with useful changes.