It will be interesting to see how, or even whether, Gov. Sean Parnell reacts to the Alaska Senate's thumbing its nose at reforming Alaska's Clear and Equitable Share oil tax during the misbegotten legislative session thankfully coming to an end.
Unafraid of Parnell, senators spit on his shoes and went about the business of spending an embarrassing amount of state money -- can you imagine a $3 billion capital budget? -- and made it clear they could not begin to be bothered by what he thinks about them or ACES. Oh, and we're not doing anything about it, anyway, they said.
Now, it is Parnell's turn. He would not be the first governor to go bonkers at this kind of legislative braggadocio. The question is: Will he?
Parnell successfully pushed his House Bill 110 through the Legislature's lower chamber. It would have changed the punitive oil tax that has been grim death for North Slope investment, exploration and production because of a built-in progressivity factor unseen virtually anywhere else. Despite the pressing need for change -- and economic indicators backing that up -- a recalcitrant Senate refused to act. At one point a frustrated Parnell called that august body a "do nothing" Senate.
As the governor turned the screws, Senate President Gary Stevens of Kodiak huffed that he refused to be "bullied" into a "$2 billion mistake," as if ACES were not a terrible mistake before its ink was dry. He said he and his colleagues needed more and better information before they would act. The world will not end, Stevens assured everybody, if the Senate waits to act. If only lawmakers had been so determined to do the right thing when they adopted ACES in 2007, when demi-Gov. Sarah Palin and legislative nincompoopism were in full bloom.
Despite the inane yammering and disheartening hype, half-truths and bald lies mostly from the left, ACES is a fiscal Godzilla.
It is easy to see why. Oil companies pay a base tax rate of 25 percent on net profits up to $30 per barrel. When net profits go up, to say $31, the base tax rate goes up 0.4 percent -- and not to just the added $1; for the entire $31. Each time that number goes up a buck, the state adds 0.4 percent to the rate. At higher prices, the industry is paying a marginal tax rate of more than 90 percent. That includes ACES, Alaska corporate taxes -- among the highest in the nation-- the state's royalty share and the federal take.
All of that makes Alaska uncompetitive for oil industry capital dollars. Because of that, exploration, investment and production are down on the North Slope. High oil prices have saved Alaska so far, but they will not last forever. The trans-Alaska oil pipeline may shut down prematurely in just a few years.
We can debate any or all of that with the pumped up numbers or partial numbers or even made-up numbers from folks who hate the North Slope companies. We can argue about the evil industry stealing from Alaskans -- about half of whom would starve without oil. But here is something inarguable: Throughput in the trans-Alaska oil pipeline is down 6 percent since last year. Nobody disputes that. Next year it will be down by at least another 6 percent, or more. We need new oil. New investment. For that, Alaska needs a fair tax.
In spite of that reality, the Senate chose to do nothing.
What will Parnell do? He has been seen, fairly or unfairly, as a Caspar Milquetoast guy, a guy who hid behind Palin's skirts. Congressman Don Young even dubbed him "Captain Zero." This Senate challenge is a critical junction for Parnell politically, a test. He could do what other governors do. Cajole. Jawbone. Deal. Threaten. Eviscerate his enemies. Call a special session. Or, he could just do what he said he would -- cut the bloated capital budget if ACES reform went belly up.
Before he is through, that budget could look as if drunken Cossacks had swept through, hacking and slashing spending in places such as Stevens' Kodiak district, where, oddly enough, it rained capital projects. If Parnell does nothing, he will be "Sean, who?"
Some would scream bloody murder, but none who irresponsibly blocked ACES reform will ever love Parnell, anyway. They might as well fear him.
It could make it easier next time.
Paul Jenkins is editor of the AnchorageDailyPlanet.com.
PAUL JENKINS
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