Bradners'

Alaska Legislative Digest

November 19, 2007     

Oil and Gas Bulletin

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

Special Session in retrospective: Implications for January

Last Friday afternoon the Alaska Legislature completed a 30-day odyssey resulting in a major rewrite of Alaska’s oil tax legislation. Estimates are this could add a staggering $1.5 billion a year to the state’s treasury. The vote in the Senate was 13-5. The House concurred an hour and a half later 26-13. This was the second time in just over a year the state has rewritten the oil tax laws. Opponents, mostly Republicans, were staggered. Most claimed the legislation was overreaching and the House succumbed to a “feeding frenzy” for revenues that will feed growth of the state budget and discourage new exploration and development necessary to stem the current decline in North Slope production.

Supporters of the tax legislation, mostly Democrats, were ecstatic. They claim that last year’s legislation (which enacted the new Petroleum Production Tax, or PPT) was tainted by corruption and did not provide the predicted revenues. Supporters believe this legislation addresses those concerns.

How did the legislation pass? Democrats picked off Republican votes

The Democrats are technically in the minority in the Senate (9 of 20) but not having wielded a chairman’s gavel in almost two decades they succumbed to an alliance with six of the Senate’s 11 Republicans to organize a leadership coalition. Senator Lyda Green became President and Senators Bert Stedman and Lyman Hoffman, who were Co-Chairs of Finance. Senator John Cowdery became Rules Chairman and Chairman of the Legislative Council. They were joined by Republican Senators Gary Stevens, Charlie Huggins and Lesil McGuire. The leadership coalition, which was engineered in 2006 by Senators Hoffman and Cowdery, was more about control and who was President and not philosophy, and it showed during the Special Session.

During the oil tax debate eight of the Democrats (Hoffman stuck with Stedman and Green) formed a temporary alliance with the remaining Republicans led by former Senate President Gene Therriault (the Republican Minority) and the Governor to craft the legislation through amendments on the Senate floor, and overriding the Republican leadership. Indications are this alliance is temporary and limited to this issue. The original Senate leadership coalition will probably survive through next session. We are told that the option of Senator Green and her Republican backers reorganizing with the Senate Republican Minority more along philosophical lines are nil. Bitter feelings run deep between the two groups and neither Green nor Therriault will consider anything less than the President’s gavel and control of the Finance and Rules Committees. Additionally the Democrats would not retain nearly the leadership positions with a group led by Therriault that they now enjoy with Green’s group. Senate Democrats, having tasted power for the first time in years with Green, are not willing to relinquish their committee chairmanship gavels. Instead, they are willing to sit back and attempt to pick off Republican votes when they can to achieve their agenda. Gas pipeline proposals are due on the Governor’s desk at the end of this month. Any legislation proposed by the Governor on that issue has the potential to cause a replay of the alliances seen during the Special Session.

The House has no coalition but during the Special Session the House Democrats were able to pick up enough pro-tax Republicans to pass amendments they and the Governor supported, rewriting a House Finance Committee bill that took a much more conservative approach. Discouraged conservative House Republicans were heard saying they had never been “in the minority” and didn’t like it. We are told many felt betrayed by their caucus colleagues.

The hard feelings in the House Republican Caucus could have an impact on the organization of the next Legislature, in 2009, depending on the 2008 election results, of course. The Democrats are optimistic they will win enough seats to gain enough of a majority to organize the House with Democratic Minority Leader Beth Kerttula as Speaker, a position her father, Jalmar Kerttula, once held. We are told Republicans believe they will remain the majority party but if they do not, they believe there are enough Democrats in the House philosophically uncomfortable with the current minority leadership that a House coalition could be possible.

Meanwhile, a somber reaction from oil and gas industry leaders

Following Friday’s votes in the state House and Senate, Doug Suttles, president of BP Exploration Alaska Inc., said, “I am disappointed with the outcome. We all need to be focused on developing new oil production for future generations of Alaskans, but this legislation does nothing to encourage more investment. I can only hope that once the impact of this legislation is clear, the administration and the Legislature will revisit the issue.”

Note to readers: We will publish a special session wrapup with more detail of what is in the new tax bill following the Thanksgiving holiday.

The second regular session of the Legislature convenes on January 15, 2008.

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.