After hearing that their oil tax bill could mean at least $6 billion in revenue lost over the next five years, the Senate Finance committee made some adjustments on Thursday.
Their new bill would give oil companies a tax break of $4 billion to $5 billion over that same period. It would bring the base tax up from 25 percent to 35 percent for the next three years. After 2016, that rate would be brought down to 33 percent. To offset that tax hike, it gives oil companies a $5 credit for every barrel they produce. And like previous versions of the legislation, it gets rid of a mechanism known as “progressivity” that raises taxes on oil when prices are high.
In addition to making tweaks to the oil tax bill, the Senate finance committee also took testimony from the major companies on the North Slope yesterday. Representatives from ConocoPhillips and Exxon avoided making commitments to new oil production, while BP’s Damian Bilbao said that the bill doesn’t go “far enough to attract the type of meaningful investment that’s required to make the future look different.”
Without clear support from the Big Three, members of the Senate Finance committee turned to their own consultants to get input on how their bill would affect oil development. Sen. Mike Dunleavy, a Republican from Wasilla, asked Econ One’s Barry Pulliam if their changes to the tax structure would have an effect on the production decline.
DUNLEAVY: Would you be surprised if in three years you found out there was little additional investment above what some would consider maintenance or routine investment? Would you be surprised if in three years that occurred?
PULLIAM: I would be, if the kind of change that you’re making here didn’t have an impact on attracting new investment.
Pulliam added that he thought that the oil companies were excited by the prospect of a tax overhaul, but wanted to avoid making commitments in hopes of a better deal.
The updated bill was moved out of committee, and the next step is the Senate floor.