Gov. Sean Parnell is reviewing whether to change state oil tax laws implemented under Sarah Palin, as oil companies blame the taxes for driving investment dollars from Alaska to other parts of the world. The governor said Wednesday that he has asked the state Department of Revenue to evaluate whether any "tweaks" should be made to the tax system that could lead directly to more jobs for Alaskans. He said he's also spoken with oil companies.
"My bottom line, if they need tax changes, and it will result in more investment, I'm all for it," Parnell said in an e-mail. "But the companies will have to justify changes in light of Alaskans' interests -- I don't intend to merely shift tax revenue from Alaskans' pockets to company pockets; instead, I intend to create more jobs and revenue for Alaskans in the long run in making any tax changes."
Parnell, a Republican who took over as governor in July after Palin's resignation, said he's had an ongoing conversation with state Revenue Commissioner Pat Galvin about the oil tax system over the past couple of months.
Republican state legislators are increasingly vocal with criticism of the tax system, known as Alaska's Clear and Equitable Share, or ACES. The Legislature passed it in 2007, as oil prices skyrocketed, at the urging of Palin and then-Lt. Gov. Parnell.
ACES represented a major tax increase on the oil companies during high oil prices, with the amount the state takes tied to the price. This year the price has fallen from the historic highs reached last year, but it is still $20 a barrel higher than the average of this decade.
State House Speaker Mike Chenault and 14 other members of the Republican-led majority wrote Parnell on Friday to say they were troubled by "mounting evidence that ACES may wind up doing more harm than good to future oil development." The legislators cited BP's plan to cut Alaska spending by 15 percent and Conoco Phillips' announcement it would not drill an exploration well on the North Slope next year for the first time in 45 years and that instead it will pursue offshore development where Alaska state taxes don't apply.
Many opponents of the oil tax are rallying behind the candidacy of former legislator Ralph Samuels, who announced Tuesday he'll be challenging Parnell for governor in next summer's Republican primary.
Parnell, who has defended ACES, said Wednesday he's spoken with virtually every oil company active in Alaska about the tax system. He said he went to Houston, Texas, two weeks ago to talk to oil companies about what was broadly needed to increase company investment in Alaska.
"In all of those consultations," Parnell wrote in his e-mail, "only two companies have actively asked for changes to ACES (Conoco & Armstrong) though neither to my knowledge has proposed anything specific. (BP cites taxes along with other factors as influencing their decisions but is not actively pursuing any change that I know of.)"
BP Alaska spokesman Steve Rinehart said Wednesday that the company's position hasn't changed since the tax increase passed in 2007. He said ACES will reduce investment at the time more is needed to slow Alaska's decline in oil production.
"Alaska's high oil taxes are bad for the industry and bad for the state. Alaska is trading long-term economic health for short-term state revenues," he said.
Anchorage Democratic Rep. Les Gara said oil company profits in Alaska compare favorably with elsewhere in the world, and new North Slope developments are coming online such as Eni's Nikaitchuq field and Pioneer Natural Resource Co.'s Oooguruk field.
Gara said the investment in Alaska, and worldwide, is also influenced by the fall in oil prices from last year's highs.
"So to say the sky is falling and to give oil companies a lot of money, which they are just going to send to Houston and London anyway, is not necessarily good policy," Gara said.
State House Minority Leader Beth Kerttula, a Juneau Democrat, said she has not seen any justification for changing Alaska's oil tax system.
"It's a profits tax. When their profits go up wildly, like they were, then Alaskans should benefit from it. It's our resource, it's our future, and we had been undertaxing for decades," Kerttula said. "Now, with the oil price down (the tax) is significantly less ... so we fluctuate right along with the industry."
House Speaker Chenault, who opposed the ACES tax system when the Legislature approved it in 2007, said there's talk among legislators of trying to change it after the Legislature convenes in January. The letter that he and other lawmakers in his caucus sent Parnell on Friday asked for statistics on oil and gas activity and how the industry has responded to tax credits meant to spur exploration. The results will be used to weigh how to proceed, the Nikiski Republican said.
"Is (ACES) working? Is it working like it was envisioned, and if it's not, then what do we need to adjust to make it more friendly to employment for Alaskans and certainly to get more oil and gas out of the ground?" Chenault said.