Governor denies Democrats' request to add oil tax reform to session

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ANCHORAGE (KTUU) - Gov. Mike Dunleavy has denied a request from Senate Democrats to add oil tax reform to the call of the second special session.

“With only a matter of days left in the special session, the Senate Democrats surely know there simply isn’t enough time to even begin examining any segment of the state’s petroleum tax structure,” read a prepared statement from the governor.

The Senate Democrats sent a letter to the governor July 18 asking that oil tax reform be discussed. “We share a grave, growing concern with many Alaskans that the state’s current oil tax structure has not provided the people the benefits to which they are entitled,” read the letter signed by five Democratic senators.

Since Senate Bill 21 passed in 2013, reducing taxes for oil companies in Alaska, some have suggested the deductions available to the oil industry are unfair to Alaskans.

Sen. Bill Wielechowski, D-Anchorage, a long-time opponent of SB 21, has said the state is missing out on $1.2 billion in revenue for fiscal year 2020, enough funds to pay for a full statutory Permanent Fund dividend and fund many state services.

During public testimony at legislative information offices in Anchorage and the Matanuska-Susitna Borough, many people suggested repealing SB 21 could help solve the state’s fiscal challenges

“We shouldn’t have to subsidize these corporations,” said Nick Moe, a member of Alaskans Take a Stand, who participated in the Save Our State rally in front of the Anchorage LIO earlier this month.

Critics of the current tax structure point to the decline in oil production seen in recent years with the promises that lowering taxes would see production increase.

The Alaska Journal of Commerce reports that the Trans-Alaska Pipeline saw a throughput in fiscal year 2019 of less than 500,000 barrels a day for the first time since coming online in 1977.

Economist Ed King disagrees that SB 21 is to blame, saying it was implemented precisely as the price of oil dropped precipitously. A falling oil price meant less production which meant less tax revenue received by the state.

Some industry analysts believe trying to claw back more revenue through taxes would lead to investment dollars going elsewhere.

“The world has more than enough oil and gas out there,” said Larry Persily, a long-time writer on the industry. ”There is more oil and gas than investment dollars to invest it.”

Kara Moriarty, the president and CEO of the Alaska Oil and Gas Association agrees, saying that higher taxes will “have a negative impact on the industry’s ability to keep spending at current levels.”

“Recent spending by oil and gas companies has helped Alaska get out of our recession, and the industry is eager to continue to help Alaska’s economic recovery through more jobs and production,” she wrote in a message. “The oil and gas industry is on the cusp of some big, new exciting fields on the North Slope; now is not the time to kill that momentum with a billion dollar tax increase.”

Wielechowski hits back at the claim that raising taxes will kill the industry. He cites figures from ConocoPhillips that show Alaska is the most profitable region in the world for the company.

King believes the ConocoPhillips figures referenced by Wielechowski isn’t an “apples to apples” comparison with the company’s profitability in the Lower 48. The figures don’t take into account the costs of depreciation, for example, said King.

Despite not being part of the governor’s call for the second special session, Senate President Cathy Giessel, R-Anchorage, said per barrel tax deductions would likely be part of the conversation over how to solve the state’s fiscal challenges when lawmakers convene for the regular session in January.

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