Alaska News

State senator convenes working group to scrutinize oil and gas tax credits

A Republican state senator has convened a new group of her colleagues to study changes to Alaska's oil and gas tax credit system following criticism that too much state money is going to industry.

The state paid $628 million in oil and gas tax credits in last year's budget, making the program one of the largest in Alaska's roughly $7 billion general fund budget. Democratic lawmakers made repeated, unsuccessful calls for the credits to be scaled back during this year's budget process, as the Republican-led majorities in the state House and Senate made cuts to other programs and services to help reduce a multibillion-dollar deficit.

On Tuesday in Anchorage, a working group on tax credits led by Sen. Cathy Giessel, R-Anchorage, who chairs the Senate Resources Committee, will gather for the first time in what she said could be up to two months of weekly meetings.

"The world has changed, the economics have changed, and that's the purpose of going into this in depth, down in the weeds," Giessel said in a phone interview Thursday. "What was true about how I viewed these two years ago may not apply anymore, and that's what I need to find out — and I know others who are going to be in this working group have the same dilemma."

Giessel -- known for her sharp gavel-wielding and for once cutting off the microphone of a Democratic colleague -- said the group is "not a committee," adding that she won't have a gavel.

The group includes six other senators: Republicans Anna MacKinnon of Eagle River, Bill Stoltze of Chugiak, Peter Micciche of Soldotna, and Click Bishop of Fairbanks, and Democrats Lyman Hoffman of Bethel and Bill Wielechowski of Anchorage.

Giessel also invited industry and labor representatives to participate, and officials from the state's natural resources and revenue departments will present on Tuesday.

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Wielechowski, a vocal critic of the current tax credit structure, said he enthusiastically accepted Giessel's request to participate in the working group.

Credits use tax policy to encourage private taxpayers to accomplish a public goal, but Wielechowski said the current system generally fails to do that.

"You've probably heard me say this 100 times, but I think the general consensus is that we need to fix oil tax credits," Wielechowski said in a phone interview. "They're excessive and they're not targeted."

Gov. Bill Walker vetoed $200 million in tax credits from the budget passed by the Legislature this year, capping payments at $500 million instead of $700 million. He said his goal in doing so was to start a discussion about an "unsustainable" system.

The veto didn't actually cancel any payments, however; it simply delayed them.

Supporters of oil and gas tax credits say they encourage new production for a state that relies on the industry to balance its budget. Tax credits aimed at Cook Inlet are viewed as reviving a moribund natural gas industry that was threatening to force the state to look to Asia for imports.

Critics, meanwhile, say the Cook Inlet credits — which last year made up more than half of the state's $628 million in payments — are no longer necessary at their current scale. That's a view supported by the Legislature's own consultants, who told lawmakers earlier last year that the Cook Inlet program should be reexamined.

The full tax credit program has also been attacked because of limited information that's available about payments to individual recipients, and because of its sheer size.

The state's tax director, Ken Alper, who will discuss Cook Inlet credits with the working group Tuesday, said in a phone interview the tax credit regime is one of the largest components of Alaska's budget after education and Medicaid.

"So, you can't go into a budget austerity cycle and hold it harmless," Alper said. "I'm hoping this isn't a posturing-based event — I'm hoping these senators really do want to talk about the pros and cons of the tax credit system."

Tuesday's meeting won't officially include members of the House, though Giessel said they're invited. In a phone interview, one of the House's most active members on oil and gas policy, Rep. Mike Hawker, R-Anchorage, said he was open to the discussion.

"As we consider the larger issue of fiscal policy in the state of Alaska, a review of our tax credit structure is certainly an inherent part of any conversation that is held," he said.

Giessel said she wants the working group to produce "concrete recommendations" by Dec. 1, before the start of next year's legislative session.

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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