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KNBA News - Bill to overhaul oil, gas credit systems stalls

Apr 14, 2016

By Rachel Woldholz, APRN - Anchorage

The scheduled debate on a bill overhauling Alaska’s oil and gas tax credits never happened on Wednesday.

Speaker of the House Mike Chenault (sha-NALT) pulled the bill, saying that it didn’t have enough votes to pass.

Members of the Republican-led House majority are unhappy with a provision of the bill that changes tax credits in Cook Inlet. But members of the Democratic minority also don’t like the bill. They say it’s too generous to industry.

Meanwhile, with just four days left in the session, a separate bill is advancing in the Senate, which could become the basis for a law, rather than the House bill. However it has plenty of critics.

The Senate bill is still a moving target. It was rushed through the Resources Committee this week -- the Republican leadership released a new version Tuesday evening and passed it Wednesday, with Minority Democrat Bill Wielechowski, of Anchorage, complaining on Twitter that he didn't even have time to draft amendments -- adding, hashtag "BadProcess."

If Democrats like Wielechowski are unhappy, that's nothing compared to how the oil and gas industry feels.

"This is a nuclear bomb for Cook Inlet," said Kara Moriarty, President of the Alaska Oil and Gas Association.

She spoke Tuesday about a proposal to zero out all cash support for small companies in the Inlet as of 2018. To balance the cut, the bill would also set a zero tax regime for the inlet, collecting revenue only through royalties.

Rebecca Logan, General Manager of the Alaska Support Industry Alliance, was even sharper.

“You guys didn't do your job. On March 15, when the budget came out of the Senate and was at $4.6 billion, I knew that you were going to come to a point where you would have to come to the oil industry because you didn't do your job on the budget,” said Logan. “And so here we are...The policy call we are faced with right now is, are we going to put more taxes on an industry that is hemorrhaging.”

The Senate bill doesn't include a hard five percent minimum oil tax requested by the governor -- and largely as a result, it would raise less than $100 million dollars a year by the time it goes fully into effect in 2020, about a quarter of the governor's proposal.

But the bill does include a controversial proposal to end tax perks for new oil on the North Slope after five years. Those lower taxes are a key part of the current system.

As the bill left the Senate Resources committee, Chair Cathy Giessel, an Anchorage Republican who is generally sympathetic to industry, said nobody is happy.

Nobody is winning right now. Nobody is winning with this bill. It’s very difficult for me to offer this kind of legislation, knowing what it will do to this resource development, and I don't want to see those jobs lost,” said Giessel.

The bill is now in the hands of the powerful Senate Finance committee, the last stop before it goes to the full Senate.

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House Minority leader says oil and gas industry has to pay its share

By The Associated Press

The minority leader of the Alaska House says that if his caucus isn't satisfied with changes to the state's oil and gas tax credit program, it will be hard to hard to justify going into a major state savings account to help cover state costs.

Minority Leader Chris Tuck says is also would be hard to justify asking people to pay taxes or make changes to the Alaska Permanent Fund dividends without tax credit changes at least on par with what Gov. Bill Walker has proposed.

Legislative leaders have said they would look to draw from the constitutional budget reserve to help cover budget costs. To meet the threshold generally needed to do that in the House, 30 votes are needed, meaning some support from the Democratic-led minority is necessary.

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Walker administration approves Legislative steps on budget, but advises more are needed

By The Associated Press

Attorney General Craig Richards says Gov. Bill Walker's administration is generally pleased with a legislative proposal calling for structured, annual draws from Alaska Permanent Fund earnings. But the administration is suggesting some changes. One option would be to put production taxes and royalties into the fund to help account for varying revenues. The other, Richards says, would be to reduce the amount that's drawn out if oil prices rise.

The House and Senate Finance committees released draft plans calling for annual draws of 5.25 percent of the average market value of the fund for the first five of the preceding six fiscal years. Richards told House Finance Wednesday that's a little aggressive as the bill is written.

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