• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Legislative Panels Tweak Governor's Oil Tax Plan

Posted on: Monday, 20 March 2006, 21:00 CST

By Richard Richtmyer, Anchorage Daily News, Alaska

Mar. 18--JUNEAU -- After hashing through the details of Gov. Frank Murkowski's new oil-tax plan during nearly four weeks of marathon work sessions, a Senate panel is eyeing a higher rate and fewer write-offs than the governor had proposed.

The Senate Resources Committee's redraft, which it released Friday afternoon, appears to go even a step further than a corresponding bill that passed the House Resources Committee, which itself was tougher on the oil companies than the administration's plan.

Murkowski introduced his proposal to replace the state's tax on oil and gas production with a new system that taxes oil-company profits. He presented it as part of a package deal his administration negotiated with the big three oil companies for tax and other state terms on a natural gas pipeline.

The governor's bill sets a 20 percent tax on company profits while allowing the companies to deduct from their taxes 20 percent of the amount they invest in Alaska oil-field development. It also includes a series of other credits and write-offs, which he says are aimed at spurring exploration and development.

The House Resources Committee on Friday passed a significantly revised version of Murkowski's bill.

Although it maintained the 20 percent base rate, the House panel opted to progressively increase the rate when oil sells at high prices, adding three-tenths of a percentage point for every $1 when oil prices exceed $50 a barrel.

The Senate's version increases the base tax rate to 25 percent. It also ties rate increases to rising prices, though at a slower pace. The Senate bill proposes stepping up 2 percentage points to the base rate when prices exceed $40 a barrel, and stepping it up another 2 percentage points for each subsequent $10 increase in price.

Sen. Tom Wagoner, the committee chairman, said the panel decided to go with the higher rate based on advice of independent oil and gas experts, including the governor's top adviser, Pedro van Meurs.

"Every one of our consultants, including the administration's consultant, said 25 percent was a good number," said Wagoner, a Republican from Kenai.

The tax rate has been controversial since it emerged in the governor's plan.

Just days before the governor introduced his bill, members of his administration, had said in public forums he intended to propose a 25 percent rate. Murkowski has said he decided to pare back the proposed rate to 20 percent as part of a compromise to get the producers to go along with a gas pipeline line deal.

Several House Democrats have been advocating for a higher rate in their bill and were disappointed that the House Resources Committee decided not to raise it.

Sen. Kim Elton, one of two Democrats on the Senate Resources Committee, was heartened by what he saw in the committee rewrite Friday.

"This tax rate makes me more comfortable because it gets us closer to the independent analysis from the consultants," Elton said. "I still have some questions, but this is a pretty good stride forward."

The Senate committee's rewrite also contains several other significant changes to some of the more controversial elements of Murkowski's plan.

For example, Murkowski's bill proposes to allow oil companies to deduct from their tax bills the value of all their oil-field investments since 2001. The governor asserts that such write-offs are fitting because the companies spent that money while expecting to pay less in tax.

The Senate committee would significantly pare that write-off, allowing the companies to deduct only three-quarters of their 2005 oil-field investments, half of their 2004 investments and a quarter of their 2003 investments.

The House committee voted to strip that write-off completely.

Senators did not discuss their proposed rewrite during the Friday committee session. A committee staffer explained the differences between it and the original bill.

After hearing more from oil-industry executives, the governor's staff and the public, committee members are likely to make more changes and pass the bill on to the Senate Finance Committee next week, Wagoner said.

Before any new tax can be implemented, both the House and Senate must pass identical versions of the bill, which the governor would then have to sign into law.

Neither Wagoner nor House Resources Committee Co-Chair Rep. Ralph Samuels could say Friday how their proposals compare, dollar-for dollar, with the governor's original bill, which the administration has estimated would yield an extra $773 million annually at $60 a barrel.

-----

To see more of the Anchorage Daily News, or to subscribe to the newspaper, go to http://www.adn.com.

Copyright (c) 2006, Anchorage Daily News, Alaska

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

Source: Anchorage Daily News

More News in this Category