Inside Rabbit Creek Community Church, Sen. Cathy Giessel, R-Anchorage, told eight mostly pro-tax change attendees the current oil and gas tax structure, called ACES, is costing jobs and investment.
Reiterating what producers told Senate Finance committee members Tuesday, Giessel said continuing North Slope oil production decline means those consequences will continue if lawmakers fail to approve tax cuts.
“At the six percent decline we're at right now, we're decreasing throughput at 41,000 barrels a day,” Giessel says.
“Seems difficult for me to say all is well when there's a six percent or more reduction per year,” a constituent named Chris told Giessel. “That seems counter intuitive. Almost like taxing at a higher rate, is better than a lower rate. Which actually stimulates revenue. They miss the point.”
Gov. Sean Parnell, R-Alaska, said last week House legislation, passed last year though House Bill 110, accomplishes real change, putting at least $14 billion in producer commitments on the table.
However, the Senate Majority, ruled by a coalition of both Republicans and Democrats, has created contention. The Senate Finance Committee is currently considering the much different Senate Bill 192, which primarily proposes reducing tax surcharges called progressivity.
Under ACES, when the price of oil rises above $30 per-barrel, taxes increase 0.4 percent for every $1 increase. Once the state takes 75 percent of a producer’s profit, that tax is capped. SB192 proposes lowering that tax rate to 0.35 percent and that tax cap to 60 percent.
Part of the Senate Minority, Giessel, like Parnell, has said SB192 does not go far enough; worrying about what happens if oil taxes, paying for about 90 percent of state government, suddenly disappear.
“If we were to tax for the budget today, it would be $17,000 for every man, woman and child,” Giessel told her constituents.
But it was a much different story down the road, inside midtown Anchorage’s Romig Middle School. Part of the Senate Majority, Sen. Hollis French, D-Anchorage, one of the legislature’s strongest ACES allies, was surrounded by upwards of 100 constituents.
“I'm kind of hearing them say hold the line,” French said. “That the oil industry will just take, take, take. And so we need to be tough negotiators from our side.”
Citing a study he commissioned, which reportedly polled 500 Alaskans, French says he is not convinced ACES is doing the damage opponents claim.
“50% said they (taxes) were too low or about right,” French said. “And only 30% thought they were too high."
With only 20 days left, the full Senate has yet to vote on SB192, which then must be considered by the House Finance Committee before being sent to the House floor. The legislative session ends April 15th.