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Lawmakers question industry's input in Alaska oil tax 'regime change'

An Anchorage lawmaker wants state officials to tell him who they met with while they were crafting the controversial oil tax bill now under consideration by the Legislature.

Rep. Mike Doogan asked Department of Revenue Commissioner Bryan Butcher on Thursday for a list of names of all the people he and other state officials consulted with in coming up with the bill. Doogan and other lawmakers have grown more and more frustrated with administration officials because they can't seem to address questions relating to the bill to the lawmakers' satisfaction.

Some legislators had begun to suspect that the bill might have been drafted by oil company executives, rather than by staff for Gov. Sean Parnell.

Rep. Les Gara sent out a newsletter to constituents this week saying as much.

"Credible rumors (we'll work on substantiating them) are that the Governor's Office sat down with oil company representatives to craft his oil legislation. Not members of the public outside the industry. Just the companies that will enjoy the $2 billion the bill proposes to shave off the share Alaskans get for their oil revenue every year," he wrote. "Which leads you to ask, who's running this state? These are the same companies that, when asked, have refused to commit to produce a single new field, or single extra drop of oil, if we give them this huge dose of corporate welfare."

DNR: Oil industry had 'lots of input' in tax revision bill

Doogan and Gara double-teamed Butcher and other revenue officials at Thursday's House Finance Committee hearing on House Bill 110.

"While I've got you gentleman at the table I'm going to ask a question I've asked before: did you guys write this bill?" Doogan asked Butcher, who was sitting at the witness table along with Deputy Revenue Commissioner Bruce Tangeman and master auditor Lennie Dees.

"Yes, we did," Butcher replied, adding that the bill was specifically written by the three of them and Joe Balash, now deputy commissioner of the Department of Natural Resources and a top Parnell aide.

Butcher hastened to add that they "certainly had lots of input" from the industry, especially to find out what sort of "game changers" there might be in any proposed restructuring of the current tax regime, known as Alaska's Clear and Equitable Share, or ACES.

"But ultimately, when we rolled the bill out in January they didn't see it one second before anyone else," Butcher said, adding that the oil industry has testified that it doesn't support some parts of the bill.

Gara followed up by reiterating his uneasiness about what he sees as a lack of information about the measure and what it would do, especially when it comes to what it could cost the state treasury. He pointed out that Pat Galvin, the former revenue commissioner, seemed to know more about oil industry, taxes and credits than Butcher.

Gara specifically asked which companies Butcher and the others worked with in writing the bill.

Butcher ticked off most of those doing business on the North Slope -- ConocoPhillips, BP, Exxon Mobil, Armstrong, Pioneer -- "virtually every company that's operating up there we talked to," he said.

Gara asked whether the companies had asked the administration to include what he characterized as the two major provisions of the bill -- the reduction in the progressivity provision and a change that would allow companies to average the price of oil over the entire year instead of basing the tax on a monthly average. The reduction in taxes is estimated to cost the state $2 billion a year and revenue officials recently said the change in accounting from monthly to annual oil price cost the state about $200 million a year.

Butcher said the companies did not make specific requests and that "from the very beginning we had talked about doing something about progressivity." Butcher did not say how the switch from a monthly accounting to an annual accounting came into the discussion.

Doogan decided to request a list of meetings involving oil company representatives and state officials relating to the tax proposal, including people who might have since left the administration.

"I want to know who was talking about stuff and when they were talking about it," Doogan told Butcher.

In an interview after the meeting, Doogan said he considered it a lot like reporting a news story. He is a former journalist who worked for the Anchorage Times and the Anchorage Daily News for decades before leaving a few years ago to write books.

"This is a major departure from any previous bill about oil and gas taxes that has ever been put into law in Alaska," he said. "I just want to know how it came together."

For his part, Gara said he is concerned that the governor relied more heavily on what the oil companies wanted then on information he might have gotten from independent consultants.

"The wrong way to write a bill is have the people who are going to make money off it write it," Gara said.

A corporate giveaway or economic investment?

Galvin, the former revenue commissioner who left office on Dec. 6, said Thursday his office did not work on the bill before he left. "There wasn't any work on the bill itself when I was there," he said.

Galvin said he'd had discussions with Parnell about capping progressivity and last year had been involved in the governor's proposals for new tax credits that did not pass the Legislature.

In the last few weeks of a spirited gubernatorial election campaign, Parnell surprised people by saying he'd decided to consider revamping ACES, a tax structure put in place by then-Gov. Sarah Palin when he was lieutenant governor. Palin was joined by Democrats and some Republicans to push the measure through in 2007 and Parnell had publicly supported it.

In a speech to the Resource Development Council on Oct. 15, Parnell talked about how to strengthen Alaska's economy and create more jobs.

"I'll start with the ACES tax regime," he told the audience. "I have personally communicated with the companies my willingness to move forward with positive changes to ACES."

His two-part plan included "eliminating -- effectively capping progressivity -- at higher oil prices" and adding new tax credits for "technically challenged fields."

HB 110 and its companion, Senate Bill 49, actually don't "cap" progressivity when oil reaches a high price but reduce it at all levels, including when oil prices are lower. The progressivity provision kicks in when oil prices climb above $30 a barrel and grows the higher the price becomes.

Parnell's measure also adds credits for more drilling in other fields besides "technically challenged" areas. 

"The only thing I require is that the industry, in the public forum of the Legislature, makes the compelling case for competitiveness and jobs for Alaskans," Parnell told the RDC lunch gathering.

That's something that critics of the measures say the industry has yet to do. One of the primary arguments from lawmakers who are reluctant to change ACES is that oil companies have not said that cutting the tax will lead to more investment and more jobs in the state.

At several hearings, when that issue has been raised, Butcher has told lawmakers that it will have to be the oil companies that convince the Legislature that the tax change will help the state.

"None of them have said they'll develop a single new well or a single new field but they are happy to take the $2 billion," said Gara, calling the governor's bill "the worst negotiation in state history."

Doogan said the industry has not made a compelling case that the tax break is needed and will result in a better economic situation for the state.

"I haven't heard a single representation that this legislation, these tax breaks, are going to do anything," he said. "I'm not saying I absolutely have to have a promise from these people but it's got to be damn close."

Contact Patti Epler at patti(at)alaskadispatch.com