Alaska House passes law that would kill Senate oil tax reform

Amanda CoyneThe New York Times
Stephen Nowers photo

Editor's note: This is a developing story. Check back for updates.

In a tricky legislative move Sunday, the Alaska State House all but killed, for the time being at least, the oil tax bill passed Saturday night by the Senate.

House Speaker Mike Chenault, in the normally sleepy House Rules committee, introduced an amendment that stripped all of the provisions the Senate added to the bill on Saturday. The House passed the bill on Sunday evening 36-3. 

The reform, as industry supporters like to call it, passed by the Senate was nearly two years in the making. Because the Senate couldn’t agree on the details of an overall tax bill, it chose to focus on what members could agree on: incentivizing new oil production in Alaska's Arctic.

And the best way to do that, members decided, was that instead of a wholesale rewrite of the tax, they would graft language on an existing bill. The one they chose dealt with tax credits that had already passed the House, where it had broad bipartisan support.

Senators hailed it as the kind of “meaningful” tax reform that Gov. Sean Parnell, along with many members of the House, had been calling for. A top official at Armstrong Oil & Gas Inc., one of Alaska’s new independent oil producers, urged the House to pass the bill.

Parnell, however, didn’t support the bill because it didn’t provide tax breaks to Alaska’s largest oil producers: BP, ConocoPhillips, and Exxon Mobil.

And the House majority didn’t take well to the fact that the Senate was putting its tax stamp on a House bill.

By Sunday morning, the bill passed by the Senate was wrapped into another bill that would give tax breaks for film companies doing business in Alaska. Those tax breaks are popular with Democrats, hence the bipartisan support for passage of the bill in the House. 

But what effectively killed the work the Senate had done the previous day was an amendment proposed by Chenault in the House Rules committee, which stripped the provisions the Senate had added to the bill.

Because the Senate’s tax version had been grafted onto a bill passed by the House, the House’s only recourse on the floor was to vote it up or down, which didn’t sit well with Chenault.

"What justification did they have to put that in our bill?" Chenault told reporters in the halls of the state Capitol after the committee met Sunday morning. "It’s not our fault that the Senate hasn’t acted."

He said he didn’t necessarily oppose the bill, but that the House just didn’t have time to study it. “It may be the right thing to do,” he said. “But we have to have an overall fix for the whole tax structure. Not an incremental one.”

Chenault’s main goal this session was to pass a bill to authorize money and authority to green light a proposed in-state, natural gas pipeline project. That bill, however, has been held up in a Senate committee. When asked if there was some deal to be made between the Senate and the House on oil taxes and the in-state gas pipeline, Chenault said he wasn’t "a guy who gets held hostage too often." However, he’s "always open to negotiations."

Those negotiations are said to be in the works. 

Anchorage Democratic Sen. Bill Wielechowski said that he hopes the Senate and the House can come to an agreement. If not, though, he said he’s “perfectly content to live with the current tax structure for another year.”

The Legislature is set to gavel out at midnight Sunday. At this point, a special session to deal with oil taxes and the in-state gas line, among other things, seems a given.

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