Oil Tax Dispute Turns Personal

The standoff over Governor Parnell’s plan to rewrite the state’s oil tax regime has turned personal.  In a letter to Senate Finance Co-Chair Bert Stedman late last week, Parnell referred to Senators working on an alternate tax reduction plan as, “a group of hens in the barnyard.”

Later, he asked Stedman not to – quote –“shoot explorers in the head”  while they look for new sources of oil.

The letter was a comment on a speech Stedman had delivered to the Juneau Chamber of Commerce last week in support of a tax proposal the Senate is pursuing.

Stedman saw the letter as entertaining and dismissed it,  saying the subject of taxation is unrelated to chickens.   But he didn’t back down from the Senate’s plan or the goal of a new tax plan. He said they need more dialog on recent issues that have recently risen.

“There are certainly more substantive issues than we have time to address.  But tomorrow we’re going to kick off at 9 o’clock with the industry.  The three majors Exxon, B-P and Conoco-Phillips will be testifying. And we’ll have PFC energy the following day – our consultant – and we’ll start working on our alterations to the bill and continue to evolve them and solve as many problems as time will allow.”

Parnell said the letter was what he called a proportional response to Stedman’s speech – asking that the focus of discussions be on getting more production on the North Slope.

Meanwhile,  the Senate’s work on providing oil incentives is not meeting the favor of the governor.   In a press conference this afternoon (Tuesday) Parnell criticized the Senate for missing a self-imposed deadline of giving its bill – SB-192 — to the House by last Friday.   He was asked specifically whether he would veto the Senate Bill.

“Twenty Six days is a lifetime in legislative hallways.  You know that and I know that. I do not support SB 192 in its current form.   I still believe though that the Senate Finance Committee can make some changes.  And it’s a Senate bill, the House can make some changes.  A lot can transpire.”

Both the Governor and the Senate have bills offering tax cuts in different ways.  The governor’s offers more reductions, and the industry is pushing it.  Parnell today (Tuesday) pointed to production promises that have been attached to his tax regime being in place.  B-P last month promised $5-Billion in new investments if the governor’s bill were to pass.  The governor today announced a commitment by Armstrong Oil and Gas – a newcomer in the state – of an additional $9-Billion in new investment.  He said the company linked that to his tax plan.

“Unless there are companies willing to step forward with money in exchange for a new tax regime, then you’ve got to question if the tax regime is worth implementing and whether it will create new business.”

A letter from Armstrong Oil and Gas refers to the governor’s plan, as the type of tax reform needed. The letter says it “could” cause the company to invest as much as $9-Billion.  Armstrong is working with the Spanish Oil Company Repsol – the exploration company responsible for a blowout at a North Slope test well last month.

Stedman said the state will need more investment than what B-P has offered to get production to the Million Barrels a Day production goal the governor has set.

“Although it might sound like a lot of money, and very attractive, but when you actually look at the funds, the investment that’s needed,  to go after this incremental oil production, it’s not going to do it.”

Stedman said he anticipates the Senate Finance Committee having the bill ready for a vote early next week.

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