March 24, 2011
Public Testimony Opportunities:
Oil Tax Proposal; Constituent Meeting
The House Finance Committee will be holding its first public hearings on the Governor’s oil tax bill (HB 110) this Thursday and Friday. This proposed bill would give more than $10 billion over the next 5 years to the oil industry in a bid to get more oil in the pipeline.
I am very supportive of more oil production and more jobs for Alaskans. However, information discovered during review of HB 110 has raised serious questions about the best way to spur more oil production and jobs. Below is a longer discussion of the oil tax issue.
Constituent Anna Attla joins Teresa Holt and Julie Broyles in talking with Rep. Chris Tuck about support for people with disabilities.
You can testify from the Anchorage Legislative Information Office (LIO) at 716 W 4th Avenue, Suite 220 at the following times:
· Thursday, March 24 5:00pm – 8:00pm
· Friday, March 25 3:00pm – 7:00pm
For more information, please contact the LIO by phoning 269-0111 or by emailing Anchorage_LIO@legis.state.ak.us.
Until now, invited testimony before the committees has been limited to supporters of the proposal.
If you plan to testify, I’d love to hear your thoughts as well. Your opinion is important to me.
I’m here for you,
Alaska State Representative
District 29 - Anchorage
Oil Tax Discussion
Alaska must remain an attractive investment to keep the oil flowing and sustain our state and high paying industry jobs.
Actions taken now will shape the legacy we leave to our children, and determine whether we have a state with a robust economy capable of allowing them to continue to call Alaska home.
So far, HB 110 has been the subject of several hearings in the House Resources and Finance Committees. When the Administration presented the bill, it stated that the goals of changing Alaska’s tax regime are:
· To make Alaska more competitive;
· To create more jobs for Alaskans; and
· To increase oil production.
The big questions facing the Legislature are: Will this legislation result in more oil development? And, is this the best way to do it?
Let’s examine the proposal through each of the stated goals.
Will This Make Alaska more competitive?
The Administration is using data from the “Fraser Institute 2010 Global Petroleum Survey” which surveys oil industry investors around the world. The Administration pointed out that:
· 44% of respondents say that Alaska tax regime deters investment
· In ranking of “attractiveness” Alaska is 68th out of 133 jurisdictions
Further investigation into the same report showed that:
· 56% of respondents believe our tax regime is either positive or neutral in determining investment. In fact, 25% say our tax regime is an incentive for investment and the remaining 31% say it has no impact at all.
· Similarly, ranking Alaska among 133 jurisdictions is meaningless when places like Illinois (with no oil development) and Iran (with instability) are included. When we compare Alaska to those places where the major companies in Alaska are currently investing, it is a very different story. The Administration’s information shows Alaska right in the same range as the other comparable jurisdictions (which include Angola, Australia, Brazil, Indonesia, Iraq, Norway, UK, and US Gulf of Mexico.)
Rep. Chris Tuck and constituent Judy Olson connect up in Juneau.
Will This Create More Jobs and Increase Production?
Governor Parnell proposes to cut taxes by an amount which Department of Revenue estimated at $1.1 billion per year, but committee examination pointed out other costs embedded in the proposal. The Administration eventually acknowledged the cost to be more than $2.2 billion every year. That’s in addition to the money the state is already paying as incentives for capital investments—almost $1 billion this year.
During committee testimony, the oil industry was steadfast in its refusal to commit to either increasing investment or to increasing Alaskan jobs. BP described the proposal as a good start. ExxonMobil said it was not enough. In other words, more than $2 billion per year in tax rollbacks would not necessarily result in any new investment, new oil or Alaskan jobs. No company promised it would produce a drop of additional oil with the $2 billion tax cut. Yesterday, BP testified once again that they cannot guarantee more exploration or jobs on the North Slope as a result of the bill.
The Administration’s “Oil & Gas Status Report 2011” says in the conclusion, “While it is untenable to blame a tax system for the lack of industry investment, it is equally untenable to claim that the tax system is the reason the increased activity or investment occurs.”
Constituents Barbara Swenson and Charlene Berg pose for a photo after their meeting.
The fiscal scheme would mean that Alaska would lose 10 Billion dollars in oil revenue over the next 5 years. That’s a big deal, using funds that have replenished our savings and now support our schools, roads and even lower our property taxes. These are critical resources that Alaskans across our state depend on to support and improve our communities.
We have heard from state and industry experts that new production will take 11 years to come online. At that rate Alaska could run out of savings before we see any revenue from increased production. Nothing the Legislature has heard so far gives Alaskans confidence this change will result in any increased development or Alaskan jobs.
Before we give away billions, the Legislature needs solid data and accurate analysis about what we’ll get in return so we can determine the best and most prudent way to move forward.
I want to increase oil production, including more credits for development and leveling the playing field for new producers looking to access existing North Slope facilities.
It is evident that the Legislature and the public are not getting the whole picture. Industry and the Governor have been unable to provide a guarantee of returns and increased Alaska hire. Everyone wants to make sure we increase production and put Alaskan’s to work. However, building the state’s infrastructure and educating the next generation of Alaskans requires state revenue. Those revenues must come from somewhere – the oil industry, small business or our pockets.
Finally, here are a few other ideas producers have said would spur investment on the North Slope:
· Oil, gas and water separation (processing) facilities are expensive. It’s why small fields usually cannot be developed on the North Slope – the income from a small field can’t justify the cost of a major processing facility. Increasing the chances the major oil companies will grant access to new companies to their existing facilities, or let new companies pay to expand them.
· Revamp the tax system to allow more significant credits to help build production facilities to pay for needed exploration wells.
2011 PFD Application Period Closes soon
Apply for your 2011 Alaska Permanent Fund Dividend today! Online applications are quick and easy, and are due March 31st.
Please join me by donating part of your dividend through “Pick, Click, Give” this year! Every Alaskan can make a difference when we file online for our PFD. Together we can celebrate the arts, lend a hand to those in need, and support our youth as they reach for success.
Through the Pick. Click. Give. option on the online Alaska Permanent Fund Dividend application, you can easily donate $25 or more to any number of Alaska nonprofit causes, community foundations, and campuses of the University of Alaska.