(Alaska Senate) Committee backs 25% oil tax rate
3-2 VOTE: Sen. Ben Stevens calls it disincentive for oil firms.
By MATT VOLZ
The Associated Press
Published: March 25, 2006
Last Modified: March 25, 2006 at 02:57 AM
JUNEAU -- A legislative committee on Friday rejected an attempt to lower the tax rate in an oil tax bill from 25 percent of companies' net profits to 20 percent.
Sen. Ben Stevens, R-Anchorage, proposed the rate change in the Senate Resources Committee. Stevens said a 25 percent tax rate on oil companies' profits would go against the goal of creating a climate for companies to invest in Alaska energy projects.
"An increase in the tax rate is a disincentive for investment," he said.
Gov. Frank Murkowski's original bill called for replacing the state's production tax with a 20 percent tax on companies' profits. That rate would be reduced somewhat by an annual tax credit on 20 percent of a company's capital investments.
That 20 percent tax rate has been the subject of much debate in the Legislature. Many lawmakers see it as too low, while oil executives say it is the limit they can accept, and it already represents a doubling of their tax rates at high oil prices.
Murkowski and the state's three largest producers agreed to the original version of the bill with the plan of incorporating it into a natural gas contract, which is a precursor to building a $25 billion natural gas pipeline from the North Slope to the Midwest.
The producers -- BP PLC, Conoco Phillips and Exxon Mobil Corp. -- say the governor's proposal, if incorporated in a long-term fiscal contract, will give them the certainty they need to invest that much money in a pipeline.
The Senate Resources Committee changed the tax rate to 25 percent and pared back some of the industry incentives in the bill, which resulted in the state's oil companies unanimously condemning the new bill.
The House Resources Committee's version of the bill keeps the rate at 20 percent. Both the Senate and House versions increase the tax rate in increments when the price of oil rises above a certain level.
Sen. Bert Stedman, R-Sitka, reminded the committee that the Legislature's petroleum consultants told lawmakers that 25 percent would not strain the industry nor would it make Alaska less attractive to invest compared to other oil-producing regions of the world.
Stevens disagreed with the consultants' conclusions, saying they were based on forecasting assumptions that may or may not prove to be accurate. A higher tax rate, he said, will put the state's future production at risk of a more rapid decline if oil companies are not willing to invest in developing the North Slope.
"There is no blood left in the sponge. It's wrung out," Stevens said.
The committee voted 3-2 to keep the tax rate at 25 percent, with Stedman and Sens. Kim Elton, D-Juneau, and Tom Wagoner, R-Kenai, voting to leave the rate as it stands.
Stevens and Sen. Ralph Seekins, R-Fairbanks, voted for the 20 percent rate.
Wagoner, the committee chairman, said he believes 25 percent is "an equitable government take," although he acknowledged it may still change later in the legislative process.
The bill still must go through the Senate Finance Committee, a Senate floor vote and a conference committee with the House. It can be changed at any of those points.
Wagoner said the latest version of the bill should be available Monday, when more amendments will be heard. He said he plans to move it to the finance committee that day.
The House Finance Committee is scheduled to take up its version of the bill on Monday.
The bills are House Bill 488 and Senate Bill 305.
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