Sunday Pizza & Petroleum
By Rep. Les Gara
This Sunday from Noon until 2:00, Senator Ellis and I will be in Anchorage if you’d like to hear a legislative update, and share your thoughts and concerns. Or you can pretend that’s why you’re coming, bring your kids, and eat free pizza.
We’d be honored if you came for any of the above reasons, and be honored to feed your kids and grandkids. Here is the low cost – like free – video invite Johnny and I put together. It’s amazing. No, it’s actually just OK. But we’re almost proud of it. Please share it with your neighbors! And your neighbors who have pizza-eating kids!
Where? The Fairview Recreation Center at 1121 E 10th Ave.
When? This Sunday, February 17th, from 12:00 – 2:00
Requiring Alaska Production for Reasonable Oil Tax Reductions
New Bill Protects Alaska: Gov’s Bill Based on Hope & Prayer, But No Requirement That Companies Invest Tax Breaks in Alaska
For the past few weeks I and others have been working on writing an oil tax reform bill that will work. We hope to get folks across the aisle to join us in looking for better ways to get new oil into the pipeline. I and my co-sponsors – and much of the public – have been very concerned about the Governor’s proposal. That bill just sends $1 – $2 billion in your oil revenue share back to the oil companies, and allows them to spend those tax breaks outside Alaska. Our alternative bill was filed this week.
Here’s a clip from our press conference where I touch on the central elements of the bill. I think I say “um” a lot.
These are the main components of our bill, which seeks to promote new oil by tying reasonable tax breaks (i.e., ones that don’t jeopardize the state’s treasury and savings) to new Alaska production:
New Heavy Oil Production: Alaska has an estimated 1.2 billion barrels of producible heavy oil, mostly in the two major North Slope oil fields, Kuparuk and Prudhoe Bay. It is one of our better resource development possibilities on the North Slope. Technology is nearing to produce that oil and we offer a tax break on new heavy oil production amounting to a break that reduces our tax on that oil to about 85% of what it currently is.
Heavy Oil Research and Development Credit: Our bill allows a tax credit where we would pay 20% of the research costs related to Alaska heavy oil production to help move that production forward. We’d cap the state cost of this credit at $10 million.
New Production from Existing Fields: We want companies to expand production from existing fields, but not to pay for what they were going to produce anyway. If a company reverses its declining production, and increases production over 2012 levels, we will offer a tax break on only that additional oil – again, at a rate that is roughly 85% of what they pay under current law. And if companies produce from distinct new geologic areas in existing units, we offer the same break.
New Oil Fields: We offer a seven year tax break to help companies recoup the costs of developing new fields. For the first seven years of production, we’ll grant companies a tax break that has them paying roughly 70% of the current tax rate.
In contrast, the Governor’s bill’s largest provision cuts Alaska’s windfall profits share by roughly $2 billion at prices of $120 per barrel, and roughly $1 billion assuming oil is at $110 per barrel. Under current law we have a 25% tax on profits. After a company earns $30 of profit on a barrel of oil, we slowly increase that rate. The tax rate at stratospheric oil prices of roughly $170 per barrel would be capped under our bill at 55%.
The Governor gets rid of that windfall profits share, so at high prices oil companies making record and near-record profits as oil prices and profits rise still pay the flat 25% tax rate.
That provision not only deprives Alaskans of a fair share. It also sends billions of that share, for Alaska’s oil, to BP, Exxon, and ConocoPhillips who have averaged roughly $2 billion a year in Alaska profits under the current law. I believe in a fair tax for oil companies, but I believe in keeping a fair share of oil windfall profits, especially at high oil prices which bring in large amounts of oil revenue for Alaskans. For our schools. So we don’t have to lay off construction workers. For roads. For our savings, and so we don’t deplete them. And so no one starts making noise about tapping into the Permanent Fund because we’ve given away our fair share of oil revenue.