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By hiring new consultants, Alaska lawmakers signal extension of oil tax debate

Pipelines at Prudhoe Bay on Alaska’s North Slope in 2015. (Loren Holmes / ADN archive 2015)

JUNEAU — Alaska lawmakers are set to hire three new oil and gas consultants, suggesting that the contentious tax debates of the past two legislative sessions could continue past this year.

The Legislative Budget and Audit Committee agreed Monday to offer In3nergy, Palantir USA and Gaffney, Cline & Associates three separate contracts. Each will run for two years, with the three contracts totaling $200,000 initially and capped at $450,000 if lawmakers request extra work, to be billed hourly.

All three companies are in Houston, Texas, the center of the American oil industry. They'll be asked to create models to inform legislators about the impact of potential tax changes on state finances and industry investment.

"It is a substantial amount of money. But the point is that it could help us in solving our oil-tax issues for billions," said Kodiak Republican Sen. Gary Stevens, chair of the budget and audit committee. "Things change all the time and we want to be competitive. We want to make sure we're getting our fair share. And these guys should be able to help us."

Lawmakers have fought particularly hard over oil taxes for the past two years, though the issue has surfaced from time to time for decades. Lately, legislators have tried to determine how much to demand from the industry as they work to close the state's multibillion-dollar deficit.

The debate all but paralyzed the Legislature last year, with an oil-tax dispute between the House and Senate lingering into June, nearly two months past the Legislature's scheduled adjournment.

This year, both the Republican-led Senate and the largely Democratic House majority agree on phasing out most of a program that allows companies with low or no oil production to claim cash subsidies.

But the two chambers disagree over how to treat those companies once the subsidies are gone. The proposal from the Senate Resources Committee, chaired by Anchorage Republican Sen. Cathy Giessel, would let some companies claim future tax deductions, with interest, instead of the subsidies — generating about $1.8 billion in deductions by 2027, according to projections by Gov. Bill Walker's administration.

The House's proposal would allow companies to claim the deductions at a lower rate, and also discount their value over time, leaving about $600 million in deductions by 2027.

The two chambers also disagree on whether to eliminate a tax credit granted to companies for each barrel of oil produced — the Senate wants to keep it and the House wants to remove it.

The new consultants will replace two others who were featured prominently in legislative testimony in recent years — Janak Mayer and Nikos Tsafos.

Hiring the new consultants suggests that the two chambers' differences won't be resolved this year, said Anchorage Democratic Rep. Andy Josephson, co-chair of the House Resources Committee, which works on oil-tax policy. And he said that could be a problem, given that oil companies argue that stability in the state's tax regime helps promote investment.

"At some point I almost take the oil industry's view, which is, 'Why are we revisiting this issue every year?' " Josephson said. He added, referring to the new contracts: "What this is saying is, 'We're not really going to have oil-tax reform.' "

Stevens said "major changes" to the state's tax regime shouldn't be expected. But, he added: "It depends what happens."

Kara Moriarty, head of the state's main oil industry group, the Alaska Oil and Gas Association, said she didn't see any special significance in the decision to hire the consultants.

"You can go back to every legislative year, almost, and there's always a bill introduced related to oil tax structures," she said. "Whether they get legs or not, that's a different thing."

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