Battle lines drawn in Senate over oil taxes

Richard Mauer
Becky Bohrer

JUNEAU -- The Senate's version of Gov. Sean Parnell's oil-tax cuts reached the chamber floor Tuesday and debate quickly became heated over questions of its effects on the state treasury and the North Slope oil patch.

The abbreviated session, technically about whether to accept the Finance Committee's version of Senate Bill 21 as the working copy, brought out Democratic challenges and Republican defenses of the measure, but no amendments and no votes.

After the series of questions, Democrats huddled on the side of the chamber and agreed to rescind their original objection to using the Finance Committee version. The session lasted a little over an hour, but much of that time was spent off the record in recess as bill backers huddled among themselves or talked to aides and administration officials in the gallery for answers to the questions posed by Democrats, such as whether the bill really protected Alaska at low oil prices as Parnell said.

(That question, asked by Sen. Bill Wielechowski, led to two such "at ease" breaks, an assertion by Wielechowski he wasn't getting an answer, and finally a statement by Sen. Kevin Meyer, speaking for the bill, that the Finance version would get $50 million more for the state than an earlier version. But he didn't answer Wielechowski's question asking for a comparison with the current tax scheme.)

The real changes and tallies on Senate Bill 21 are expected to begin Wednesday when the Senate convenes at 11 a.m.

A somewhat downcast looking Wielechowski, an opponent of the measure, said as he was leaving the Capitol Tuesday afternoon that Senate President Charlie Huggins had said he would schedule a final vote if he had at least the minimum 11 for passage. Wielechowski, an Anchorage Democrat, said he heard from Huggins that the vote would be scheduled.

The consistent holdout has been Sen. Click Bishop, a moderate freshman Republican from Fairbanks. If another question mark, Sen. Mike Dunleavy, R-Wasilla, votes for the measure, Bishop would be needed to push it over the top, assuming all seven Democrats and two moderate, veteran Republicans -- Gary Stevens of Kodiak and Bert Stedman of Sitka -- vote against it.


Would he or wouldn't he?

Amid rumors that Bishop had agreed to vote for the bill, Sen. Lesil McGuire, one of its staunchest supporters, said just before the start of the Tuesday session that Bishop would introduce an amendment that would make it more to his liking -- eliminating the drop in the base tax rate from 35 percent to 33 percent a barrel after three years. That change alone could add more than $200 million to the state treasury every year.

McGuire, R-Anchorage, corrected herself later and said the amendment was authored by Sen. Peter Micciche, R-Soldotna, and that "Peter's going to make it, actually."

And she stopped short of saying the amendment would bring Bishop firmly in her camp.

"I can't say there's any one thing," she said during one of the frequent breaks. "What I would say is there are some members that feel more comfortable with that rate. There was a collective feeling that was the right rate and the right balance between government take and private industry take and that there was consistency."

Bishop himself declined to describe his intentions as he left the chamber.

The oil-tax bill would throw out the current tax structure known as ACES -- Alaska's Clear and Equitable Share. ACES was largely a product of Gov. Sarah Palin and legislative Democrats and moderate Republicans. After her election as a populist in 2006, Palin sought to dump the industry-favored but corruption-mired tax code passed by the previous Legislature.

The central feature of ACES was a progressive tax on oil production -- as prices and profits rose, the percentage of tax increased. Oil companies complained bitterly because the state became the main beneficiary of unexpectedly high prices.

Parnell, as Palin's lieutenant governor, was an advocate of ACES and its progressive tax. But since his election in 2010, he has been walking away from ACES, saying it has suppressed oil production in Alaska because companies would rather drill where taxes were lower. His Senate Bill 21 threw out progressive taxes entirely. Parnell's lower taxes apply to all production -- in relatively easy, massive fields like Prudhoe, or smaller, more difficult patches. One incentive in his bill, relief from taxes for some production, would apply only to wells that tap new pools.

But opponents say the Parnell bill would give billions of dollars back to the oil industry over the next decade with no guarantee of any change in behavior. And they say that Alaska's taxes are not extreme.

One of the critics, Stevens, the former Senate president, said Tuesday that in addition to its huge costs, the bill should have a "sunset" clause. If it doesn't work as advertised and result in new production, ACES should automatically return, he said, because getting the Legislature to raise oil taxes on its own can be a gargantuan task.

"We've found it takes an FBI investigation and members of the House to go to jail to really seriously deal with a tax increase, so that's why I think it has to have a sunset clause," Stevens said.



Senate Bill 21 has taken a bumpy road to the floor. In the effort to win over Bishop, McGuire had called an unusual hearing of the Senate Rules Committee for 9 a.m. Tuesday.

The Rules Committee, the last waypoint for bills before they reach the floor, is usually a sleepy checkpoint where everything gets waived through. But McGuire, its chairwoman, said she planned to hold a hearing and call experts to testify on changes that would, she hoped, bring Bishop into the fold.

But a legislative legal opinion requested by another senator said the notice for the meeting -- a brief mention McGuire on the floor of the Senate Monday -- was "likely" insufficient under Senate rules. The Rules hearing was abruptly cancelled Monday evening, and then the Senate session, originally scheduled for 11 a.m., was pushed back to 1 p.m., heightening the sense of intrigue in the Capitol.

At one point, Stedman was spotted in Sen. Dennis Egan's office, trying to track down a rumor that Bishop had given up his holdout status.

Parnell continued his lobbying. Stevens said he got an invitation from Parnell to the third floor of the Capitol at 8:30 a.m. for a 9:15 a.m. meeting. Stevens said Parnell was pleasant during the 15-minute meeting and made neither threats nor promises.

"Nor would I listen to that," Stevens added.

When the bill reached the Senate floor, Sen. Kevin Meyer, R-Anchorage, led its defense as the co-chairman of the Finance Committee. But he and Micciche also declared conflicts of interest -- both work for ConocoPhillips, a major beneficiary of the bill. As is customary in the Legislature, other senators shouted objections to their recusals and they will vote like anyone else.


Reach Richard Mauer at or in Juneau at 1-907- 500-7388.



Contact Richard Mauer at or on