Bradners'

Alaska Legislative Digest

October 22, 2007     

Oil and Gas Bulletin

Comments? E-mail: timbradner@pobox.alaska.net

Administration lays out its case for an oil tax increase

Administration presentations Saturday comparing Alaska's Petroleum Profits Tax (PPT) regime to world competitors led some lawmakers to conclude that Alaska is a generous jurisdiction for oil producers and that the severance tax could be raised above the 25 percent rate proposed by the Palin administration. Data showed the 'total government take,' including all state and federal taxes and fees on Alaska oil is about 62 percent of total net revenues compared to 75 percent among comparable oil provinces like Norway or the United Kingdom and more than 95 percent for some Asian countries.

Sen. Bill Wielechowski (D-Anch.) suggested Alaska's stable environment and long-term leases may work against the goal of promoting investment after administration consultant Rich Ruggiero, of Houston-based Gaffney, Cline & Associates, said producers may tend to spend first in politically unstable countries where they negotiate agreements to take profits before nationalization or other disruptions occur.

Legislators zero in on administration’s PPT cost estimates

Sunday's joint House/Senate hearing began with a barrage of skepticism from lawmakers, led mostly by Republicans, over the Palin administration’s figures and data sources. Sen. Tom Wagoner (R-Kenai) still a supporter of a gross production tax, said he would not accept administration claims that labor expenses on the North Slope were a significant part of estimated 100 percent cost increases without hard data. Several others agreed, though some felt that increases in hiring might account for some of the cost increases.

Information from the state administration indicated North Slope per barrel production operating costs rose from $7.27 estimated in the August 2006 fiscal note on HB 3001 (the PPT bill) to $14.56 estimated in last spring's revenue forecast. Estimated capital expenses jumped from $3.59 to $6.81 per barrel for the same period. Total North Slope producing costs, operating and capital, went from $2.1 billion to $4 billion during the same period. Revenue commissioner Pat Galvin said he had no indication that the PPT could yet be credited with any investment behavior change. He acknowledged that the estimates were not based on any hard data but only on 'what we heard' from the industry, and suggested lawmakers question company people in hearings planned soon. Several lawmakers asked for more substantial explanation of why Gov. Palin shifted from her election campaign support for a gross production tax to the net profits levy.

Veto override session unlikely

Monday is the fifth day of the special session and the deadline, under the Legislature's Uniform Rules, for the House and Senate to try to override Gov. Sarah Palin's vetoes of $231 million from this year's capital budget bill. A three-quarter majority of the 60 lawmakers is required to override appropriation vetoes. Senate President Lyda Green, Oct. 19, said she would be 'willing' to convene the joint session but wasn't sure 'if there's the juice,' meaning the will of the Legislature to take on the governor. Both bodies held pro-forma sessions Sunday morning and have only technical sessions scheduled for Monday morning.

Rep. Crawford preparing another initiative petition

Rep. Harry Crawford (D-Anch.) said he is selling some rental property in Anchorage to raise funds for a new initiative petition to impose a natural gas reserve tax and will have the proposal ready to submit to Lt. Gov. Sean Parnell on Nov. 18 if he is not satisfied with the outcome of the special session, which reaches its 30-day limit the day before. Crawford was one of the sponsors of a previous gas reserves tax initiative that was defeated by voters. The Anchorage democrat will also present his own alternative to Palin’s tax bill. After listening to consultants Pedro Van Meurs and Daniel Johnston say last Thursday that Alaska's revenue take from oil production is below other producing regions, Crawford said he is redrafting his alternative bill to the governor's ACES proposal to increase what had been a 19 percent tax on gross oil production.

Monday's schedule:

9 a.m.

• House Special Committee on Oil & Gas: Invited stakeholder presentations.

10 a.m.

• Senate Resources Committee: Legislative consultants will testify.

Legislative Digest is a paid-for private subscription service. Our special session Bulletin is distributed free as a public service, and is supported by special grants from a group of subscribers. Editors: Mike and Tim Bradner. Contributing writer: Bob Tkacz.  Interested in getting the regular Legislative Digest and Alaska Economic Report? Contact: mbradner@GCI.net or fax at: (907) 522-1761.