Bradners'

Alaska Legislative Digest

November 13, 2007     

Oil and Gas Bulletin

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

Senate reviews House oil tax bill, considers its own changes

The Senate Finance Committee met for an hour and a half late Monday afternoon to hear brief reviews of oil tax legislation passed by the House late Sunday. Both the Senate floor session and the Finance committee meetings were delayed while senators waited for the Legislature’s bill drafters to complete work incorporating numerous amendments to the bill made Sunday night on the House floor. A Senate Finance version of the bill, to reflect the committee’s own ideas on the tax, is due by 10 a.m. Tuesday when the Finance committee is scheduled to meet again. 

Brief overviews were presented on the House bill by Legislative Budget and Audit Committee consultant Dan Dickinson, Barry Pulliam of Econ One, and David Teal, with the Legislative Finance Division. The discussion gave hints to the direction Senate Finance is headed. The committee, we hear, will consider reducing the base tax rate of the net profits tax from the 25 percent supported by the House and Governor back to the existing 22.5 percent. However, senators may offset the impact of the lower base rate by changing the “progressivity” formula, lowering the trigger point to $30 per barrel from the House trigger of $40 per barrel and eliminating the House cap at 50 percent of net profits and also “stair-stepping” the tax to capture greater revenues at extreme high oil prices. The progressivity formula increases the rate of tax as oil prices climb above a certain trigger price. Depending on the price of oil this formula could, in certain scenarios, increase the state’s take over the House version.

Additionally, the committee substitute could address, among other issues, the standard operating cost deduction proposed by Rep. Beth Kerttula (D-Juneau) which passed the House on two close 21-19 votes. This provision sets the base year for operating cost deductions at 2006 and allowable increases at 3 percent per year. A report on this provision is due in 2010.

The first time this amendment passed the House floor on Sunday it was approved 21-19 with Rep. Peggy Wilson (R-Wrangell) voting yea. A few minuets later she moved to reconsider her vote and switched to nay, which would have meant a 20-20 vote defeating the amendment. However, Rep. Carl Gatto (R-Palmer) switched his vote from nay to yea and canceled the effect of Wilson’s switch. Some Republicans voted for amendments offered by minority Democrats through Sunday’s floor session, and Speaker Harris even teams with Democrats on some amendments. There were myriad rumors of “deals” being brokered between some Republicans and the minority Democrats on voting, and reports that some of this was aimed at the 2008 regular session of the Legislature, which convenes in January.

The Senate is meanwhile facing its own organizational issues and these are affecting the Finance Committee’s approach to its substitute bill. Overall, the Senate leadership is attempting to craft a bill they hope will be tolerable enough to the House to attract 21 votes, a majority in that body. Both the House and Senate are attempting to agree informally on some version of a Senate bill so that the House can adopt the Senate measure, avoiding a conference committee appointed to work out differences between separate House-passed and Senate-passed bills. Legislators hope to finish their work by the Friday midnight deadline.

Note: Adjournment deadline is midnight Friday, Nov. 16!

The session’s 30-day limit requires adjournment by midnight Friday, Nov. 16.

Tuesday’s schedule:

• Senate Finance Committee meets at 10 a.m. (Note: This may depend on when legislative drafters finish their work on the Senate bill).
• Senate floor session at 4 p.m.
• House reconvenes Thursday at 10 a.m. 

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.