Politics

Oil-tax bill that passed Alaska House gets a chilly welcome in the Senate

On a hot Saturday in Juneau, the Alaska House's compromise oil tax bill got an icy reception from Senate leaders.

House Bill 247, which passed Friday by a bipartisan 25-12 is aimed at closing the state's $4 billion budget gap. It would slice tax deductions for big North Slope producers and also sharply cut subsidies projected at $775 million next year, which go to smaller companies.

But it landed with a thud at Saturday's hearing of the Senate Finance Committee, where its two co-chairs said they feared the bill's long-term cost to the state in jobs and oil production would exceed its short-term potential to generate cash.

"We change our tax as much as we change our underwear," said Fairbanks Republican Sen. Pete Kelly, who chairs the committee with Sen. Anna MacKinnon, R-Eagle River.

"Why we're here is because we don't have enough money. The changes we're talking about making are going to make it so we have even less money," Kelly added. "We're not losing money right now — we're not getting as much as we could."

Kelly is right that the state isn't losing money from oil production, but only barely. If lawmakers stick with the status quo, Alaska is projected to net about $250 million in revenue next year from the industry — a little more than $1 billion in income balanced by a projected $775 million in cash subsidies.

The figure notches up to $450 million by subtracting $200 million in cash subsidies that were added to next year's budget when Walker vetoed them from this year's budget. But the figure is still a fraction of the $5.1 billion in net oil revenue Alaska received in 2014, when oil prices were substantially higher.

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In spite of its skepticism, the Senate Finance Committee indicated it would work quickly to advance HB 247: It scheduled public testimony on the legislation for 9 a.m. Sunday.

The state Constitution requires this year's regular legislative session — which has already continued four weeks past a soft 90-day deadline — to finish Wednesday, unless there's a two-thirds vote by both the House and Senate to extend.

The Senate has at least two options with HB 247.

It could simply vote it down and start over in a special session. Or it could pass an amended version and hash out the differences with the House in a conference committee convened for that purpose.

Kelly and his colleagues were quick to criticize the legislation in Saturday's hearing. When members of Gov. Bill Walker's administration endorsed the measure and described it as a "stronger" version of the legislation initially offered by the governor, MacKinnon, responded: "That's one word to describe it."

She also demanded the Walker administration produce an analysis of the oil production that could be lost if the House's legislation were signed into law.

"I expect that you can give us the numbers specific to this, to tell Alaskans how much production we lose," she told Walker's tax director, Ken Alper. She added later: "I don't want to be shortsighted in looking at the long game."

The finance committee includes no members of the Senate's four-member Democratic minority. But Sen. Bill Wielechowski, D-Anchorage, watched the hearing and said he was "not very hopeful" the Senate and House would reach a compromise on the legislation anytime soon.

"I see the battle lines being drawn already," he said.

Wielechowski also questioned the comments from MacKinnon and Kelly, saying the objections to the frequency of changes to the state's oil tax regime come only when a proposal would hurt the industry.

And he said Senate Republicans never asked for the same oil production analysis when they passed a tax cut for the oil industry in 2013.

"It was always this sort of amorphous, 'Maybe we'll produce more barrels of oil if this happens,'" Wielechowski said. "There was never a data-driven analysis like they're requesting now."

Nathaniel Herz

Anchorage-based independent journalist Nathaniel Herz has been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at natherz.substack.com

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