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Parnell's oil tax cut proposal clears Alaska Senate TAPS committee 'as-is'

Pat Forgey

A state Senate committee charged with finding ways to boost declining flow through the trans-Alaska pipeline has concluded the only way to do that is exactly what Gov. Sean Parnell proposes -- reducing the amount of money Alaska collects from oil companies.

The Senate Special Committee on TAPS Throughput has passed without changes Parnell's Senate Bill 21, restructuring the ACES oil tax and eliminating its profitable "progressivity" provision that raises tax rates at higher oil prices.

Earlier this session, committee leaders repeatedly said their mission was not to look at revising ACES. "This is not an oil tax committee," said Sen. Peter Micciche, R-Soldotna, and employee of ConocoPhillips. Micciche co-chairs the committee, and he has taken the lead on oil tax issues. He turned the gavel over to Sen. Mike Dunleavy, R-Wasilla, his co-chair, when ConocoPhillips executives testified before the committee.

State's only tool?

The committee officially concluded the only "lever" the state has to influence how much oil the companies produce is to reduce the state's share of the profits from that oil. The price of oil, the biggest lever, is one of many over which the state has little or no control, it said. "Total government take through oil taxation is the only lever under the control of the people of Alaska," the committee wrote in a "Letter of Intent" accompanying the bill as it moves to the Senate Resources Committee.

That focus on lower taxes is what Alaska oil producers, including ConocoPhillips, have urged.

The company's top Alaska lobbyist told the committee earlier that it would do more in Alaska if taxes were lower.  Already, ConocoPhillips is doing more in other parts of the country where taxes are lower, he said.

"There's an equitable tax environment in the Lower 48 that does not discourage investment," said Scott Jepsen, director of governmental relations for ConocoPhillips Alaska.

Despite the party-line vote in the Senate TAPS committee to reject amendments to the bill and adopt the letter of intent, Micciche said the concerns of critics, such as Sen. Berta Gardner, D-Anchorage, are included in the letter, which addresses such issues as tax incentives, restructuring tax credits, and Alaska-hire preferences. Gardner acknowledged that the concerns she raised, including some that had been voted down by the committee, were included.

Democrats' tax proposal

However, the focus of the letter is reducing how much Alaska collects, something proponents said will yield benefits.  

"Policies must deliver the clear message to the business community that Alaska will not continue taxing to fund unsustainable levels of government spending," the letter said.

Legislative Democrats on Monday rolled out their own oil tax proposal that would tweak the existing ACES system to boost oil production by tax credits and loans for new investment.

"There are other ways to get oil into the pipeline than cutting taxes," said Sen. Bill Wielechowski, D-Anchorage.

Micciche said he drafted the letter, which was provided to other committee members "a few hours" before the vote. He said that was fair to Gardner, the committee's lone Democrat, because the Republicans on the committee got it at the same time.

Gardner said she had not had time to study the letter, but would not attempt to stand in its way -- other than voting against it.

Micciche said later that passing the bill to its next committee shouldn't be interpreted as support for the governor's bill without changes.

"I think this bill needs some fairly significant changes for me to support it," he said.

Contact Pat Forgey at pat(at)alaskadispatch.com