Parnell pushes oil tax cuts at rally

March 30, 2011 

A day after state Senate leaders said they would not be rushed into a decision on a tax break for oil companies, Gov. Sean Parnell headlined a rally in Anchorage urging Alaskans to step up pressure on them with a letter-writing campaign.

The governor took aim Wednesday at what he called "do-nothing senators" skeptical of his tax legislation that would dial back progressively higher taxes as oil prices increase. Petroleum company investment is at a standstill and the industry will continue to invest elsewhere, threatening the long-term life of the trans-Alaska pipeline, unless something is done, he said in remarks punctuated by applause.

"Our critics offer no viable alternatives," Parnell said.

Parnell spoke at a banquet room at the Dena'ina Civic and Convention Center to nearly 1,000 people who paid $35 apiece for the luncheon sponsored by the Alaska State Chamber of Commerce, the Alaska Oil and Gas Association, the Resource Development Council and a dozen other pro-development business groups. At each table were orange cards giving participants an opportunity to write short, personal messages in support of Parnell's measure. Rally organizers plan to bundle the comments and forward them to lawmakers.

Upward of 90 percent of state government general fund revenue comes from the petroleum industry.

High oil prices have kept state coffers overflowing but the main source, wells on the North Slope, continue to decline in production. The trans-Alaska pipeline operates at less than one-third capacity at about 600,000 barrels per day.

Parnell announced a goal of boosting that to 1 million barrels per day within 10 years and said his bill was a start.

"We've seen what the status quo looks like," he said. "It looks like an empty pipeline."

The target of Parnell's bill is tax reform championed by his predecessor, Sarah Palin, under a plan known as Alaska's Clear and Equitable Share, or ACES. The tax, which has been in effect for less than four years, has a 25 percent base rate and progressive surcharge triggered when a company's net profits top $30 a barrel.

The idea behind it was that the state would help companies with credits on the front end and share with them in the good times, when oil prices were high.

State Sen. Lesil McGuire, R-Anchorage, voted for the measure but said at the rally she regrets doing so.

"I'm sad that I voted for ACES," she said. "I apologize that I voted for ACES."

The Legislature, she said, in 2007 had replaced a fiscal regime with another one that was not working.

"ACES is the product of what I would call a 30-day race, a sprint, on the part of good people who truly care about this state who were given information in a tight, compressed circumstance," she said. "And most of those people, most of those people, if you ask them today, will tell you that they got it wrong. They went too far."

Parnell said ACES was set up with $60 to $80 per barrel oil in mind, not the current price in the range of $117 per barrel.

The measure on Tuesday cleared a key committee, House Finance, but faces a higher hurdle if it makes it to the Senate, where members of the bipartisan majority have demanded an indication that oil companies would actually increase investment in return for a tax break of up to $2 billion annually.

Senate President Gary Stevens, R-Kodiak, on Tuesday called the proposal "a hope, a wing and a prayer" and said the administration had not done a good job justifying the need to change the tax structure. Stevens also said there's been a disconcerting lack of assurances from industry leaders that they would invest more if taxes are cut.

Parnell said tax law could be changed again in four years if it was shown to be not working. Inaction, he said, entailed a greater risk.

"Alaska cannot afford the do-nothing strategy," he said.

Rep. Les Gara, D-Anchorage, took a dim view of Parnell characterizing critics as "do-nothing" legislators. Alternative plans to promote production were offered in both the House and Senate. House Democrats, he said, floated a plan that tied tax credits to exploration wells and construction of processing facilities, he said.

"We offer tax breaks that require they invest in Alaska," he said. "The governor's problem is that he gives them a blank check. If there's a do-nothing bill, it's the governor's."

Parnell's bill will be debated on the House floor today, Gara said.

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