Monday, August 14, 2006

How Individual Lawmakers Voted On New Alaska Petroleum Profits Tax


Last Thursday (August 10th), the entire Alaska State Legislature voted to approve a new petroleum profits tax. The bill sets a base tax rate of 22.5 percent of companies' profits from their Alaska operations. That tax rate would rise by .25 percent for every $1 rise in the price of oil above $55 per barrel. (graphic at left courtesy of Anchorage Daily News) The Senate passed it handily by a 14-5 margin, while the House needed Rep. Carl Moses, suffering from a pinched nerve causing some loss of feeling in his legs, to fly in at the last moment to cast the deciding vote, resulting in approval by a 26-14 margin. Thursday's Anchorage Daily News story about the vote here; Sunday's Daily News story about the individual "roll call" here.

At current prices, the tax rate would be about 28 percent of companies' profits. The producers would be able to claim credits and deductions in the tax bill and use them to partially pay for developing natural gas facilities and infrastructure on the North Slope.

The tax is expected to bring Alaska $2.4 billion this year when oil is $60 per barrel, according to state Department of Revenue estimates. That is $1.3 billion more than the state's production tax takes in now at similar prices.

However, some detractors believe the credits and deductions would bleed away a good portion of that money. Another concern is that the section of the bill that defines what company costs will and won't be deducted is ambiguous.

"I think we're saying we're going to get all this revenue, when those of us who have kind of read this whole package know that we're going to take that revenue away," said Sen. Gretchen Guess, D-Anchorage. "Don't tell Alaskans we're going to get more revenue, and then pay out that revenue for a gas line ... without them knowing what costs are coming."

Guess believes that the time interval between sanctioning the pipeline and the beginning of gas production could be a particularly dangerous financial time for the state. During that time, revenue will drop as state subsidies will kick in, but no money will be coming in from the gas to make up for them. In addition, nobody knows what effects the shutdown at Prudhoe Bay will have on the tax plan, said House Minority Leader Ethan Berkowitz, D-Anchorage. "We haven't seen one ounce of analysis in any of the bills we looked at," Berkowitz said.

Sen. Con Bunde, R-Anchorage believes the ultimate reward of billions of dollars the natural gas pipeline will bring makes initial costs worthwhile. "We might have to put a few pennies in the piggy bank to get the fund growing, but our rewards in the future will be well worth that and our constituents will be well served," Bunde said. Dan Dickinson, a consultant to Gov. Frank Murkowski who helped draft different versions of the production tax bill, agreed with Bunde. "If this gets investment we wouldn't have gotten otherwise, it would be money well spent," Dickinson said.

Point Thomson, the state's largest untapped gas field with an estimated 8 trillion cubic feet, could be a big beneficiary. Through tax credits and deductions, the Alaska government could pay as much as $4 billion to develop the field. That possibility grated on several legislators.

Exxon Mobil is the operator of Point Thomson. The company's 30-year delay in developing the Point Thomson field spurred an order from the Division of Oil and Gas last fall to come up with a better development plan or risk losing its leases. But the commissioner of the Department of Natural Resources and six of his top deputies left their jobs over protest of the gas pipeline contract Murkowski was still negotiating. The new commissioner who came in, Mike Menge, granted Exxon Mobil a stay of the order while the pipeline deal was being negotiated.
With that history fresh in their minds, some lawmakers felt passing the tax bill, with its allowances and subsidies, would reward Exxon Mobil for what the company should have done years ago.

Sen. Hollis French, D-Anchorage, tried to remove from the bill all references to natural gas, making the tax, tax credits and deductions eligible for just oil production. That would eliminate the subsidized development of Point Thomson, he said. His amendment failed 7-12, with 11 Republicans and Sen. Lyman Hoffman, D-Bethel, voting against.

Here's how individual lawmakers voted on the legislation (Republicans denoted in boldface):

SENATORS IN FAVOR

Con Bunde, R-Anchorage
Bettye Davis, D-Anchorage
Fred Dyson, R-Eagle River
Lyda Green, R-Wasilla
Lyman Hoffman, D-Bethel
Charlie Huggins, R-Wasilla
Albert Kookesh, D-Angoon
Donny Olson, D-Nome (candidate for Lieutenant Governor)
Ralph Seekins, R-Fairbanks
Bert Stedman, R-Sitka
Ben Stevens, R-Anchorage
Gary Stevens, R-Kodiak
Thomas Wagoner, R-Kenai
Gary Wilken, R-Fairbanks

SENATORS OPPOSED

Johnny Ellis, D-Anchorage
Kim Elton, D-Juneau
Hollis French, D-Anchorage
Gretchen Guess, D-Anchorage
Gene Therriault, R-North Pole

SENATORS ABSENT

John Cowdery, R-Anchorage

HOUSE MEMBERS IN FAVOR

Mike Chenault, R-Nikiski
John Coghill Jr., R-North Pole
Jim Elkins, R-Ketchikan
Carl Gatto, R-Palmer
John Harris, R-Valdez
Mike Hawker, R-Anchorage
James Holm, R-Fairbanks

Reggie Joule, D-Kotzebue
Mary Kapsner, D-Bethel
Michael Kelly, R-Fairbanks
Pete Kott, R-Eagle River
Gabrielle LeDoux, R-Kodiak
Bob Lynn, R-Anchorage
Kevin Meyer, R-Anchorage

Carl Moses, D-Unalaska
Mark Neuman, R-Big Lake
Kurt Olson, R-Soldotna
Jay Ramras, R-Fairbanks
Norman Rokeberg, R-Anchorage

Woodie Salmon, D-Chalkyitsik
Ralph Samuels, R-Anchorage
Paul Seaton, R-Homer
Bill Stoltze, R-Chugiak
William Thomas Jr., R-Haines
Bruce Weyhrauch, R-Juneau
Peggy Wilson, R-Wrangell


HOUSE MEMBERS OPPOSED

Tom Anderson, R-Anchorage
Ethan Berkowitz, D-Anchorage (candidate for Lieutenant Governor)
Sharon Cissna, D-Anchorage
Harry Crawford, D-Anchorage
Eric Croft, D-Anchorage (candidate for Governor)
Nancy Dahlstrom, R-Eagle River
Richard Foster, D-Nome
Les Gara, D-Anchorage
Berta Gardner, D-Anchorage
Max Gruenberg Jr., D-Anchorage
David Guttenberg, D-Fairbanks
Beth Kerttula, D-Juneau
Vic Kohring, R-Wasilla
Lesil McGuire, R-Anchorage


This was the last big hurdle. Now the lawmakers can proceed with further discussion and analysis of the natural gas pipeline contract itself. Those interested in the history of this effort can review the previous posts below.

Related Previous Posts:
Alaska Lawmakers To Resume Tackling Petroleum Profits Tax..., July 24th, 2006
Petroleum Profits Tax Or Gross Value Tax?, July 7th, 2006
Full Senate Passes Petroleum Profits Tax, May 23rd, 2006
Senate Finance Committee Passes 22.5% Petroleum Profits Tax, May 20th, 2006
Alaska State House Passes Oil Tax Bill, May 9th, 2006
House To Act On Senate Oil Tax Bill, April 27th, 2006
Full Senate Passes Oil Tax Bill, April 25th, 2006
Proposed New Alaska Petroleum Profits Tax, April 9th, 2006

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