Oil tax cut stalled out in Senate

Sean Cockerham | Tribune Media Services
Barbara Gologergen signs a banner in support of Gov. Sean Parnell's bill to reduce oil taxes at the Dena'ina Center today before an Alaska Chamber of Commerce luncheon rally. BILL ROTH

JUNEAU - Senate leaders said Tuesday the governor has failed to sell his plan to cut oil taxes by billions of dollars, and they're not interested in taking the gamble that it's going to lead to more drilling.

"It does seem to me like the administration has not done a particularly good job of defending its bill. They have not explained the repercussions of the bill. They have not been able to delineate specifically the advantages that we get if we do away with those taxes," said Senate President Gary Stevens.

Stevens, a Republican from Kodiak, said Parnell's plan "all seems to be a hope, a wing, and prayer."

"The question has always been, show us. What is the proof, what do we get if we give away $2 billion a year. What does the state get out of it. And there have not been adequate answers," he said.

The Alaska State Chamber of Commerce will attempt to turn the tide with a rally today in Anchorage in support of Parnell's bill, with the governor as the featured speaker. The president of the Arctic Slope Regional Corporation, which does oilfield work, wrote a letter to all rural legislators and told them the state "is on the verge of taxing itself out of the oil and gas business."

The governor didn't agree to a request for an interview Tuesday but responded to Stevens' remarks in an email.

"Sen. Gary Stevens' remarks are a bit shocking given he was in my office less than a week ago talking about a potential compromise to increase oil production and jobs for Alaskans," Parnell wrote. "His statements today appear to reflect those in his caucus who want to tax more so they can spend more. I'm not going to stand by and watch them grow government coffers at the expense of feeding Alaskan families." Senate leaders are more interested in a proposal by Kenai Republican Sen. Tom Wagoner than what Parnell is talking about. Wagoner has a bill offering tax credits for oil and gas exploration, an approach that a top supporter of Parnell's tax cut plan called just a "baby step."

"I don't think a baby step is in the right direction. I don't think it sends a strong enough message to the oil industry that we want them here, we want them in Alaska," said House Speaker Mike Chenault, a Nikiski Republican.

Wagoner responded that it might be considered a "baby step" compared to Parnell's sweeping tax cut.

"But it is a way to get to the point the governor wanted to get to without giving up $2 billion with no guarantees at the end of the day," Wagoner said.


The effort to cut Alaska's oil taxes is finding success in the state House. The House Finance Committee on Tuesday passed the measure out by a vote of 8-3. That sends it to the floor of the House for a vote as soon as this week.

But it doesn't much matter if the House passes the measure if the Senate isn't interested in doing so.

Senate President Stevens said at this point he doesn't see the bill moving out of its first Senate committee -- much less making it to the floor for a vote.

Sitka Republican Sen. Bert Stedman, co-chairman of the Finance Committee said there's not enough information to make a decision to cut the amount of revenue collected under Alaska's oil tax system, which legislators put in place in 2007. He said one problem is that the state is years behind on its audits of the severance taxes paid by the companies, and he wants data that is more up to date.


Stedman also pointed to a new ad that Parnell's Department of Revenue took out in the publication Petroleum News. It says the state offers generous exploration tax credits and the number of petroleum companies doing business in Alaska almost doubled between 2006 and 2008. "Alaska: We're Open for Business!" the ad declared.

Supporters of Parnell's bill argued the problem is Alaska's oil tax discourages companies from developing oil once it's found. Chugiak Republican Rep. Bill Stoltze said the ad is the state putting the best spin on the tax, comparing it to taking out a personal advertisement looking for a date.

People wouldn't want to put in the advertisement that they are unemployed and their favorite activity is going to Star Trek conventions, he said.

Stoltze said he sees the oil tax debate as about short-term state revenue against building up the economy. He voted for the oil tax in 2007 but said he's become convinced it's damaging and that's not "because of a love of large oil companies."

Anchorage Democratic Rep. Les Gara said such a large tax cut means lost funding for needs like teachers and troopers. He predicted the results would be "For Sale" signs all around Anchorage. "It's likely if it passes to be the biggest economic catastrophe in the state of Alaska since the Exxon Valdez," Gara told reporters.