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Politicians Split On How To Judge New Oil Tax System

Now that a bill lowering taxes on oil companies has passed, the big question is: Will it work?

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At a press conference on Monday, Gov. Sean Parnell named a few indicators that might suggest whether his bill is succeeding. He says he expects to see changes to Alaska’s level of oil production within the next three years, and that his administration is basing its budget outlook on the idea that oil companies will add a handful of rigs to legacy fields. Parnell says his administration will also be watching the amount of money that producers put toward capital expenditures.

“The major companies have invested approximately $2 billion a year on average to kind of maintain where they are. I think that’s a good base-level starting point to say, ‘What are you going to jump up to? What are you going to bump up to?’”

But beyond that, Parnell didn’t provide much in the way of concrete metrics for judging his oil tax policy. He stayed away from defining success in specific terms, and he also avoided offering a hard timeline for evaluating his bill. Parnell also tried to temper expectations for his legislation, saying he didn’t expect to see dramatic growth in oil production immediately.

Democratic legislators have criticized Parnell for not offering clearer benchmarks. Sen. Hollis French, of Anchorage, says they also worry the administration might count projects that are already scheduled to go online as new investment.

“When they start having those ribbon cuttings, and the brass bands, and the big hullabaloos over new things happening on the North Slope, we’re going to remind the public these were already planned.”

The new tax structure is scheduled to go into effect in 2014.

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