CSSB 305 (RES) Testimony Before House Finance Committee

April 29, 2006

Thank you Mr. Chairman.  For the record, my name is Tadd Owens.  I am the executive director of the Resource Development Council.

I appreciate the opportunity to comment today on Senate Bill 305.

Let me begin by saying, RDC recognizes the need to restructure the ELF system.  However, we find the current version of the PPT proposal extremely problematic.

The Governor’s original proposal — a doubling of the effective severance tax rate — was troubling in its own right.  The current bill — which drives the effective rate even higher — will serve as a roadblock to capital investment and will leave valuable resources in the ground.

Never in RDC’s 31 years of operation have we supported a doubling of any tax on any of our member industries.  To do so now is unthinkable, particularly given the fact the oil industry pays nearly 90 percent of the state’s bills.

We are very concerned the base tax rate in the current bill remains too high.

We are also concerned with the concept of “progressivity” as outlined in the current bill.  Even ELF — a regressive system — is currently providing the state with a massive budget surplus.  A progressive system based on gross value will be complicated to administer, will not account for the economic reality of increased costs and inflation, and will cap the industry’s upside in Alaska thereby downgrading the state’s ability to attract investment.

We believe the Legislature should create a system as easy to understand and administer as possible.

We urge you to create a system that gives Alaska a competitive advantage for capital investment.

Create a conservative system that errs on the side of long-term production, not short-term tax revenue.

Create a system that provides increased revenue stability for the state, rather than a system that exacerbates our history of highs and lows.

Finally, don’t begrudge the industry for being profitable.  Celebrate our shared good fortune.  Profits equate to new investment, jobs and business contracts for Alaskans and a healthy state revenue stream.

Thank you again for allowing me to comment and good luck with your continued deliberations.