Resource Development Council

RDC Testimony:
CS SB 21 - Oil and Gas Production Tax

Anchorage LIO
Before Senate Finance
Testimony provided by Carl Portman

March 6, 2013

Good afternoon. My name is Carl Portman and I am the Deputy Director of the Resource Development Council. I am here to express RDC’s support for meaningful oil production tax reform this session.

RDC is a diverse statewide business association comprised of members from the oil and gas, mining, timber, tourism, and fishing industries.

We have heard that Governor Parnell’s approach to oil production tax reform is a “give-way.” In our view, the real give-away is the oil stranded in the ground because we’re simply looking at maximizing short-term tax revenue at the expense of encouraging investment and new production.

Consider that since 2007 we have lost over 210 million barrels per day with a gross value at point of production of over $17 billion. If a less aggressive tax regime could cut our decline rate in half, over 8 billion new dollars would be circulating in our economy. We are giving away our future for short-term and clearly unsustainable tax revenue.

Some of the most vocal proponents of production tax reform among our members are from those not directly involved in the oil and gas industry. The business community is fearful what continued TAPS throughput decline will do to our economy as a whole.

The Governor has shown leadership in outlining his four guiding principles that we firmly support: fairness to Alaskans; encouraging new production; simplification and durability over the long term.

The discussion needs to be on how to encourage more production and a more long-term view. Taxing ourselves to prosperity is a poor strategy and will undermine future production and the health of the private sector, the foundation of Alaska’s economy. We remain concerned that the legislative process will result in a tax policy that is too timid and does not encourage the investment needed to stem the production decline.

There is an urgent need to compete, to stem the production decline, to increase investment. We need a tax policy that makes Alaska a compelling place to invest. Alaska needs to stand out from its competitors. The resources are in the ground, all we need is the right policy to get the oil into the pipe.

The committee substitute is a big step in the right direction and it is an improvement over existing tax policy. However, RDC does not believe the bill goes far enough in making Alaska stand above its competition. An average government take is not a good position to be in. I would urge the Committee to rely on what the consultants and investors have shared and take to heart what they consider the strengths and weaknesses in the bill. After all, it is the investor who will ultimately determine where to invest.

In concluding, I urge the committee to do sufficient due diligence to ensure the goals set out in the legislation are fully achieved. Thank you for your service and for this opportunity to testify.