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Pressure ramps up on lawmakers as Senate oil-tax vote nears

Amanda Coyne
Amanda Coyne photo

JUNEAU -- Outside of the Alaska state capitol building on Wednesday, a group of legislators and citizens waved signs, sang songs, and demanded justice for the botched prosecution of former Alaska U.S. Sen. Ted Stevens. Gov. Sean Parnell, among others, gave a speech about Stevens, the longest-serving Republican U.S. senator in history. Wearing a replica of the famous "Incredible Hulk" tie given to Parnell by Stevens's daughter Lily, the governor promised to, like Stevens, fight for Alaska, and see justice done.

Because a straight line can be drawn between the prosecution of Stevens and the oil tax debate in Juneau in 2005-06, that the rally took place during the thick of yet another heated oil tax debate might have struck some as ironic. Particularly since the current debate, the third in seven years, is an indirect spawn of that Murkowski-era one, one that will live in infamy.

Acknowledging the irony, however, wouldn't bode well for Parnell's agenda. And irony wouldn't fit the mood inside the state capitol Wednesday, anyway, where another oil tax bill -- one that doesn't enjoy the governor's blessing -- was in the process of jump-scotching from one Senate committee to the next.

As details were hashed out that would at long last move Senate Bill 192 -- the Senate's answer to Parnell's demand for state oil-tax reform -- to a full vote on that chamber's floor, groups hovered in the capitol's halls, oil executives and lobbyists huddled and harried senators walked around, whispering to their aides.

To the dismay of some, senators aren't debating whether Alaska should cut taxes on its oil producers. Rather, the debate revolves around how much of a break to give some of the most profitable businesses in the world.

Parnell has pushed hard for tax breaks of up to $2 billion a year when oil is priced at $120 barrel, which is where its hovered recently. If oil rises to $150, that tax break would increase to nearly $3 billion a year under Parnell's plan. 

Parnell has repeatedly said the tax break means more investment by industry in Alaska, a state where more than 85 percent of state government is funded by oil taxes and royalties.

Others, who are more skeptical of the oil companies, want these commitments in writing before giving away so much.

Under the current structure, Alaska's oil industry -- dominated by Exxon Mobil Corp., BP and ConocoPhillips -- makes a combined annual profit of about $4.8 billion off of Alaska's reserves when oil is priced at $110 a barrel. When it's $120, that total is more than $5 billion.

The state's take is roughly double that.

Pressure on lawmakers from the oil industry has been and remains intense. Commercials from the groups charged with keeping taxes low, Make Alaska Competitive as well as the Alaska Oil and Gas Association, to name a few, loop nearly continually on Gavel to Gavel, Alaska's version of C-Span, compliments of Juneau's KTOO-TV. Gavel to Gavel is on nearly every computer and television set in the capitol building.

Senate Finance Committee chairmen Bert Stedman, R-Sitka, and Lyman Hoffman, D-Bethel, did their jobs to split the difference between what the state currently receives versus what the Parnell administration, state House and oil industry have together pushed for.

The bill that emerged from Senate Finance, on its way to the floor Thursday, kept tax breaks to a minimum for oil that's currently being produced, but dramatically cuts oil taxes for new fields and "incremental fields."

Currently producing fields will pay about $142 million less when oil is $110 a barrel. When oil is around $120 per barrel, as it's been recently, the companies will pay about $277 million less than they are currently paying. When oil is $150 a barrel, however, the companies will pay $1 billion less than they would under current prices.

The details are still being hashed, but it appears that big decrease in the current Senate version is with incremental and new fields, where companies will get more than a 40 percent break on their tax bill.

The bill wouldn't have passed out of committee if Stedman and Hoffman didn't have the votes. How many votes is the question. Sen. Bill Wielechowski, D-Anchorage, has been one of the harshest critics of any bill that decreases taxes on the companies. He said Wednesday night that he didn’t know how he would vote.

Nor does anyone know what will happen when the House gets its hands on it.

Stedman thinks it’s a good bill, certainly not, in his words, the kind of "VECO bill" of yesteryear, before the FBI arrived in 2006 and busted the cabal. But it is a compromise, he said. It is "a fairer split" between state and industry when prices are high.

It’s delicate however, perhaps best represented by a decorated egg sent to Stedman by one of his constituents on Easter. The egg, a nod to Parnell who compared the Senate’s bill to an egg that is "shiny on the outside, and empty on the inside" was painted lovingly in landscape and entitled, "SB 192." It sat on a shelf in the Senate Finances room during the roll-out of the bill.

"Don't anyone break this," Stedman warned the lobbyists, executives, reporters and others waiting for the bill's rollout.

Contact Amanda Coyne at amanda@alaskadispatch.com