GOP trio defy Murkowski tax
LEVY ON OIL PROFITS: Binkley, legislators pan Murkowski's proposal.
[Note: This tax proposal is a key part of the gas pipeline deal, so it looks like the whole deal is in trouble. -Snow]
By KYLE HOPKINS and RICHARD RICHTMYER
Anchorage Daily News
Published: July 7, 2006
Last Modified: July 7, 2006 at 08:06 AM
The debate over how much to tax Alaska's biggest industry, the pursuit of one of the largest construction projects in history and the battle over who will become the state's next governor all collided Thursday.
First, John Binkley, a Republican candidate for governor, stood with House speaker John Harris and Senate Resources chairman Tom Wagoner and said the Legislature should toss out incumbent Gov. Frank Murkowski's plan for taxing oil companies.
Instead, Binkley, Harris and Wagoner urged lawmakers to pass what they called a simpler oil tax system. Wagoner said he plans to offer an amendment or bill to do just that when the Legislature meets in special session Wednesday. Harris and Wagoner are key members of the Republican leadership in the Legislature. Their proposal directly conflicts with the proposal by Murkowski, the Republican incumbent.
Murkowski, in response, stood by his plan, saying as he has for months that if lawmakers don't endorse it they risk losing a chance to build a natural gas pipeline.
Other major candidates for governor -- Democrats Tony Knowles and Eric Croft, Republican Sarah Palin and independent Andrew Halcro -- say they've got problems with Murkowski's tax plan too. Many have talked about tax proposals similar to the ideas Binkley and Wagoner suggested.
Oil is Alaska's biggest industry, but every year, less oil is being pumped from the ground. How much the state taxes the industry, and how it encourages more drilling, determines how much money Alaska has for things like building schools and roads.
Last February, Murkowski proposed overhauling the way the state taxes oil production. He introduced a bill that would replace the state's production tax with a tax tied to the oil companies' net profits.
The governor's plan, which is part of a package deal that links oil taxes with a contract for state terms on the proposed natural gas pipeline, also included a series of tax credits and other incentives aimed at spurring production.
Alaska gets most of its money to run state government from taxes, royalties and other oil income. Production taxes make up about a quarter of the state's oil money.
Such an overhaul could bring in hundreds of millions of dollars in extra revenue for the state when oil prices are high, as they are now. But it also could result in lower tax receipts than the state currently receives if oil prices drop.
The Legislature was deeply divided on the terms of the governor's proposal. Some members thought it left too much of Alaska's oil wealth in the hands of the companies. Others thought it taxed them too much.
Still others worried that the complexity of the proposed structure would be riddled with loopholes that would enable oil-industry lawyers and accountants to manipulate the system and pay less tax.
During the regular legislative session and a special session that ended in early June, lawmakers failed to reach an agreement on the oil tax. Murkowski called them back for another special session beginning next week to try again.
Wagoner, from Kenai, said he'll put forward an alternative that would base the tax on the gross value of the oil instead of the profits the oil companies make from selling it.
"I plan ... to offer either a new bill or a very major amendment to the governor's proposed (net profits) tax that will tax on the gross," Wagoner said.
Democratic lawmakers, who have pushed for a similar tax structure for years, were thrilled to hear that a Republican senator had embraced the idea.
"It's something of a breakthrough," said Senate minority leader Johnny Ellis of Anchorage.
"For years we were voices in the wilderness," Ellis said. "This really will expand the debate we should be having."
Senate President Ben Stevens, one of the strongest legislative supporters of Murkowski's plan, harshly criticized Wagoner's idea, which he called a politically motivated delay tactic. Stevens, however, has lost much of his clout and on Wednesday withdrew his bid for re-election, making him a lame duck.
Although special sessions are slated to run 30 days, the one starting next week will be about three weeks because many lawmakers plan to attend national conventions on energy and education.
Stevens said that won't be enough time to work through a whole new tax concept.
"We spent 150 days understanding a system that brings more revenue to the state and creates incentives to attract investment to stem the decline in production," he said. "If they think they're going to be able to bring in an amendment of that magnitude and get it done within 20 days -- it's just not going to happen."
Rep. Ethan Berkowitz, the House minority leader, said a tax based on the gross value of the oil is much simpler than a profits tax. Recent Democratic bills proposing such a tax system have been five or six pages, as opposed to the 35-page profits-tax bill that failed.
"We can get the job done," said Berkowitz, an Anchorage Democrat who is running for lieutenant governor. "It's a much simpler bill. The technical details are not going to be as complex."
Murkowski spoke at an Alaska Federation of Natives conference Thursday, telling members to urge their legislators to vote for his oil tax proposal, which he said could lead to lower energy costs and gas pipeline jobs in rural Alaska.
Murkowski said he hadn't heard details of the oil tax proposals by Binkley, Wagoner and Harris, but asserted that Binkley's press conference early that morning only politicized the issue.
Palin, who is running against Murkowski and Binkley in the Aug. 22 Republican primary, was setnet fishing with her family in Dillingham on Thursday, but she issued a press statement that said: "I commend John Binkley for his statements against a profit-based oil tax and a flawed gasline contract for Alaska. This echoes our long-standing message."
Croft, the gubernatorial candidate and a Democratic representative for Anchorage, said he was glad to hear of Wagoner's plans.
"We have now a system that taxes a percentage of the true value of the barrel of oil. And the percentage is too low, but that's a good system," he said. "The governor wants to change to a system where we tax the profit that Exxon reports on every barrel of oil, and that's dangerous."
Knowles served as governor from 1994 to 2002, and is running against Croft in the Democratic primary. He called Binkley's proposal an endorsement of his own ideas on how to tax oil.
"I'm glad Johnny Binkley wants to continue with the methodology that I established as governor," he said.
Halcro talked Thursday about the need for a tax system that emphasizes new development to replace declining production from older fields.
The Legislature has to pass a new oil tax system during this special session because the state isn't getting a fair market value at today's rates, he said, but Halcro didn't expect any resolution on the governor's proposed gas line terms because the pipeline issue has become so politicized.
"It's unfortunate because the state's going to suffer," he said.
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