2012 Alaska Legislative Priorities Report 

The oil tax debate in Juneau will be at center stage  
Gov. Sean Parnell and North Slope producers argue the state’s high tax rate impedes new investment particularly in the large operating fields. Unlike the exploration underway, where it will take several years to bring new oil into production, major producers like BP and ConocoPhillips say new production can be established relatively quickly in the large producing fields if the state can offer tax relief to encourage new development.

Parnell’s bill to adjust the tax, HB 110, passed the state House in 2011 and is now in the state Senate. There’s reason to be optimistic about some movement on this. In a recent talk to Commonwealth North, an Alaska business and policy group, Senate President Gary Stevens, R-Kodiak, said the Senate will develop a compromise tax proposal to the House-passed bill that will focus on a formula in the production tax that sharply escalates the tax rate at high oil price ranges. Stevens’ remarks and similar statements by Sen. Bert Stedman, Republican from Sitka who is co chair of the Finance Committee, signal a possible breakthrough in the political impasse that developed over the oil tax bill in 2011.

(This is a Catch 22. If HB 110 were to pass then the State of Alaska would be giving the oil companies an estimated $2 billion tax break which would have originally gone into Alaska’s savings account. That money is usually used for the capital budget which would affect infrastructure projects in Alaska. HB110 also doesn’t guarantee more work for Alaskans on the North Slope. On the other hand, the oil companies say that if this bill doesn’t pass, they would be forced to do business somewhere else and there would be less oil going through the Alaska Pipeline, possibly forcing it to shut down. At this time Local 302 is staying neutral and waiting to see what the Senate will develop as a compromise tax proposal.)

HB30 is a bill that would establish the state-funded program, create a board to oversee the project selection and provide a funding mechanism. The mechanism would direct revenue from state motor fuel tax and motor vehicle registration fees to an endowment fund that would manage and distribute annual funding into the transportation program. There is also a similar bill 37 sponsored by Senator Joe Thomas that would create a transportation fund to help fund Alaska’s infrastructure.

(Local 302 supports both of these bills. The transportation program will create jobs for our members and the additional funds would ensure that the State of Alaska wouldn’t have to rely on federal grants in the future.)