Legislature expected to revisit oil taxes

ACES: More lawmakers call Palin-era tax increase a mistake.

January 6, 2011 

Momentum is building in the Alaska Legislature for a push in the coming weeks to roll back the oil tax increase that stands among the biggest legacies of Sarah Palin's time as governor.

The oil industry and its allies in the Legislature tried and failed last year to cut the profits tax, which still has influential defenders, particularly among Democrats in the Senate. But anti-tax legislators are getting ready to make a hard run when the 90-day legislative session starts in just over a week. Some lawmakers who voted for the tax when it passed in 2007 with Palin's backing have flipped.

"I think we did get it wrong, and we've got the figures and it's a lot of money," said Sen. Tom Wagoner, who will co-chair the Senate Resources Committee.

Wagoner, a Republican from Kenai, said he thinks the tax rate is allowed to rise too steeply when oil prices are high. Wagoner told the Resource Development Council on Thursday that he plans a bill to try to do something about it.

He said his goal is to spur the companies to take the money and invest it in Alaska projects instead. It's one of what are likely to be several oil tax proposals coming.

House Speaker Mike Chenault, who opposed the 2007 change, called it an unfair tax that stifles jobs and needed oil production. The Nikiski Republican said he's gathering data from the oil companies to counter legislators who argue the tax isn't hurting. His goal is a major tax overhaul.

"Is there enough support in the Legislature today? I don't know," Chenault said Thursday.

Lawmakers such as Anchorage Democratic Sen. Bill Wielechowski are unconvinced.

He told the Anchorage Chamber of Commerce recently that he hasn't seen evidence the state is taking too much through the oil tax known as ACES, which stands for Alaska's Clear and Equitable Share. "Since the passage of ACES, investment is up, jobs are up, the (North Slope oil production) decline rate is down," he said.

He said he's never received any assurance the companies will spend more in Alaska if taxes go down. State finances would be in trouble if it had been repealed, he said. Instead, he said, Alaska enjoyed a surplus and has billions in the bank.


Not all Democrats seem eager to defend the tax, though. Fairbanks Democratic Sen. Joe Paskvan, who co-chairs the Resources Committee, signaled openness to considering changes when he spoke to the Resource Development Council on Thursday. The Democratic nominee for governor, Ethan Berkowitz, made replacing the oil tax a theme during his campaign last fall.

Berkowitz lost. But Republican Gov. Sean Parnell, who supported the tax when he was Palin's lieutenant governor, now says it needs to be changed. Parnell this legislative session is advocating a limit on how much the tax can go up as oil prices rise.

Senate President Gary Stevens, a Kodiak Republican, said he's interested in changes but reluctant to go as far as the oil industry wants. Stevens said in an interview this week that he'd rather see lower taxes targeted at new projects rather than a wholesale rollback that includes the existing big oil fields.

"We need to try to find the right balance, Alaskans benefiting from our resources at the same time we're trying to encourage big oil to explore and develop," Stevens said.


North Slope oil production has been steadily declining since 1988 and is expected to drop to about 616,000 barrels a day through the current fiscal year.

The Revenue Department forecasts production will bump up in the next couple of years from projects under development. But the decline is expected to resume, with the department predicting North Slope production at 520,000 barrels by 2020.

Alaska Department of Labor statistics show oil and gas employment rose from 11,700 jobs to record levels after the ACES oil tax system passed in late 2007. But then jobs began to drop, going from 13,700 at the end of 2008 to 12,000 two months ago.

A majority of legislators who are now on the influential state House Finance Committee voted for the ACES oil tax increase in 2007. But two of those, Bill Stoltze of Chugiak and Bryce Edgmon of Dillingham, have express doubts about it since.

The state Senate is evenly split between Republicans and Democrats. But the bipartisan majority caucus that holds the power has more Democrats than Republicans.

That includes Democratic Sen. Johnny Ellis of Anchorage, who is in a key position as gatekeeper for bills to reach a vote. Senate President Stevens said the majority caucus hasn't hashed over oil taxes going into the legislative session. But he said it's going to be one of the defining issues over the coming 90 days.

Find Sean Cockerham online at adn.com/contact/scockerham or call him at 257-4344.

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