Bradners'

Alaska Legislative Digest

November 6, 2007     

Oil and Gas Bulletin

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

Sunday’s late-night House Resources bill: legislators await details

Most legislators in Juneau were still waiting for printed copies late Monday of a heavily amended version of Gov. Sarah Palin’s oil tax bill reported from the House Resources Committee late Sunday night. Over 30 amendments were considered as well as 10 or more “amendments to amendments” during lengthy committee sessions. The Department of Revenue cranked out revenue estimates for legislators during the committee meeting, the first time this has ever been done, and then had to do a corrected estimate Monday which may be revised again once the final version of the bill is out. A 1 p.m. Finance Committee session was pushed back to 4 p.m. and then cancelled while the panel awaited a clean copy of the House Resources bill.Meanwhile the Senate Finance Committee got to work Monday afternoon on its version of Palin’s bill, reported from the Senate Judiciary Committee Saturday afternoon.

Revenue department: Senate bill hikes taxes on oil by $1.4 billion this year

The version of Gov. Palin’s bill reported from Senate Judiciary on Saturday would raise taxes on petroleum producers $1.409 billion in fiscal year 2008, the state’s current budget year, over amounts collected by the existing Petroleum Profits Tax, according to estimates prepared by the Department of Revenue. About $400 million of that, however, is due to a retroactivity clause that makes the tax effective as of January 2007. The estimate for FY 2008, the budget year beginning next July, is $1.085 billion over what the current PPT would generate. In comparison, the House Resources version of Palin’s bill that emerged Sunday night would generate $727 million over the current tax in FY 2009, the revenue department estimated. Both bills set the base tax rate at 25 percent of net profits. The difference comes with differing “progressivity” formulas that escalate the tax rate as oil prices increase. The Senate Judiciary formula is more aggressive.

House Finance co-chair: Floor vote in House by next Sunday?

Republicans members of the House Finance Committee gave a status/outlook report of the special session and related issues at an 11 a.m. news conference yesterday. Rep. Mike Chenault (R-Nikiski), Finance co-chair, was hopeful that the bill would reach the House floor “at least by Sunday,” but drew chuckles when he suggested possible 3 a.m. mark-up sessions. Chenault also said lawmakers could stay in Juneau past the Nov. 17 special session end-date under an extended call from Gov. Sarah Palin or their own initiative until an “appropriate” bill was passed.

Chenault said the current Petroleum Profits Tax rate is an issue “to be very concerned about.” He said he supports former Gov. Frank Murkowski’s proposal for a “20-20” tax (20 percent tax and 20 percent investment tax credit) and said he will discuss a tax reduction rather than an increase. He also said he was concerned with the penalties for underpayment of taxes and language in the pending bill designating poor oil field maintenance as criminal negligence. Finance Vice Chair Bill Stoltze (R-Wasilla) said he would watch for opportunities to promote saving of windfall revenues the bill could yield. He said he is working on a measure to move automatic deposits of oil royalty revenue into the Permanent Fund from the current flat rate of 25 percent to a sliding scale.

In the House Finance press briefing Finance Committee member Mike Kelly (R-Fairbanks) declared his support for the governor’s efforts. He said he supports elimination of the gross tax floor in favor of a “robust” progressivity surcharge, as the state administration now does. Kelly also said oil and gas companies are “short sighted” if they do not realize the only way to close the oil tax debate is to support Palin’s initiative and agree to pay more taxes.

Correction: Senate bill tracks administration in maintenance deduction

We erred in our November 5 report in describing language in the Senate Judiciary Committee bill regarding deductions for oil field maintenance. We said language from SB-80, a bill pending in the Legislature, had been incorporated into the bill. That isn’t the case. The bill actually reflects language the administration introduced in the governor’s original bill. It still requires, however, state employees to make judgment calls on when maintenance is “unplanned” and “planned” (non-deductible or deductible for purposes of calculating the net profits tax).

Tuesday's schedule

• 9 a.m. Senate Finance Committee: historical and projected costs of capital and operating expenses.
• 11 a.m. House Finance Committee: House Resources Committee substitute. Presentations by legislative consultant Steve Porter and Revenue Commissioner Pat Galvin.
• 1 p.m. Senate Finance Committee: investment tax credits.
• 5 p.m. House Finance Committee: continued presentations.

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.