At the end of last year's legislative session, the bipartisan Senate majority couldn't come to agreement on an overall oil tax bill, but the great majority of senators did agree on one element: a robust tax discount for production from entirely new oil fields.
The bill passed the Senate 17-3 and then died in the House in the final days of the session. The Senate's proposed discount was 30 percent. It was targeted specifically at oil companies with prospects outside the legacy fields of Prudhoe Bay, Kuparuk and Alpine.
Disagreement over how to measure remains a complex issue, and so far disagreement over "legacy fields" has bogged down the "new fields" legislation, on which there is much broader agreement.
The "new fields" bill still represents the right course for the Legislature. We believe legislators should separate the "new fields" and "legacy fields" issues and pass a "new fields" bill immediately That would be a step forward for all Alaskans, with no downside.
Last year's Senate was wise to split the issue and solve the easier part of the oil tax and production problem. That bill provided a tax break for production from prospects that yield no revenue now. The tax break would offer a significant additional incentive for explorers. The state would stand to gain production and revenue it doesn't have now.
For Alaskans fearful of "giveaways," the benefits to producers would depend on actual performance, not just promises.
The Senate ultimately could not agree on tax breaks for oil -- new or old -- from the legacy fields. Among other things, senators couldn't agree on a baseline production figure to distinguish "new" oil from "old" oil. That's important because the state should not give the biggest producers -- BP, ConocoPhillips and Exxon -- tax incentives to do what they were going to do anyway.
We still need to look at appropriate tax changes to spur additional production from legacy fields, but that's going to require more consideration by legislators. In the meantime, we could immediately reward companies willing to take the risk to find and develop brand-new fields.
We shouldn't let the perfect be the enemy of the good, as they say. This course offers a guaranteed win for everyone -- if we're smart enough to take it.
BOTTOM LINE: State should offer a healthy tax break for new production outside legacy fields.