Changes to oil tax bill scale back incentives for new oil

With just over a week left in the legislative session, lawmakers are still wrangling over the always-contentious issue of oil taxes.

Gov. Bill Walker has requested a complete overhaul of the state’s oil and gas tax credit program. The House Resources committee scaled back that proposal.

Now, a third committee has weighed in. The House Finance committee chose a middle route — while also introducing some changes that weren’t even in the governor’s bill.

APRN’s Rachel Waldholz has been following the debate.

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Rep. Steve Thompson, R- Fairbanks, co-chair of the House Finance Committee, during a committee meeting March 9, 2016. (Photo by Skip Gray/360 North
Rep. Steve Thompson, R- Fairbanks, co-chair of the House Finance Committee, during a committee meeting March 9, 2016. (Photo by Skip Gray/360 North

TOWNSEND: Rachel, where do we stand right now?

WALDHOLZ: The numbers are kind of squishy, but if you look out at fiscal year 2018, the governor’s plan would raise or save more than $400 million. House Resources, which was the first committee to weigh in, their plan would have saved less than $100 million. House Finance’s plan saves in the $100 million to $200 million range. So it’s in between, but it’s nowhere near what the Governor is asking for.

TOWNSEND: What’s new in this bill?

WALDHOLZ: Well, the Governor’s bill would have repealed some credits and it would have raised the minimum tax on the North Slope. House Finance has moved beyond scaling back credits, it’s now tinkering with some of the core structure of the existing tax system.

For instance, the House Finance bill would sunset incentives on new oil. So this is a key part of our current tax structure, lower taxes on new oil, and the House Finance bill would say, look, after five years it’s no longer new oil, it goes back to being charged the same amount as legacy fields like Prudhoe Bay and Kuparuk.

TOWNSEND: Oil taxes are complicated and even a lot of lawmakers don’t totally understand them. What’s the big picture?

WALDHOLZ: One big philosophical question really is:  Do you think the state is getting its money’s worth from these credits?

The Governor and his administration would argue no, especially at low prices, we’re paying too much money. We don’t need to pay 65% of the cost of a well to make it attractive.

And some of these credits, like the ones in Cook Inlet, were designed in response to very specific crises that have passed. We’re not worried about a natural gas shortage, so it’s okay to scale back those credits, they would say, without a huge impact on the state.

But lawmakers say, look, these credits are an investment in more oil. And if you scale it back, you might have less exploration and development, and then less oil 10 or 20 years down the line. So they want to be much more cautious about it.

TOWNSEND: So, what’s next in the process?

WALDHOLZ: You can think of the bill as being in stop two of six in the legislature. It’s gone to House Resources, right now it’s in House Finance, then it goes to the House Floor, Senate Resources, Senate Finance and Senate Floor. If the two bills are different, it goes to the Conference Committee and then to the Governor.

So at this point, all that we really know is that the bill is certain to change.


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Lori Townsend is the News Director for the Alaska Public Radio Network. She got her start in broadcasting at the age of 11 as the park announcer of the fast pitch baseball games in Deer Park, Wisconsin. She has worked in print and broadcast journalism for more than 24 years. She was the co-founder and former Editor of Northern Aspects, a magazine featuring northern Wisconsin writers and artists. She worked for 7 years at tribal station WOJB on the Lac Courte Oreilles Ojibway Reservation in Wisconsin, first as an on-air programmer and special projects producer and eventually News Director. In 1997 she co-hosted a continuing Saturday afternoon public affairs talk program on station KSTP in St. Paul, Minnesota. Radio brought her to Alaska where she worked as a broadcast trainer for Native fellowship students at Koahnic Broadcasting. Following her work there, she helped co-found the non-profit broadcast company Native Voice Communications. NVC created the award-winning Independent Native News as well as producing many other documentaries and productions. Townsend was NVC’s technical trainer and assistant producer of INN. Through her freelance work, she has produced news and feature stories nationally and internationally for Independent Native News, National Native News, NPR , Pacifica, Monitor Radio, Radio Netherlands and AIROS. Her print work and interviews have been published in News from Indian Country, Yakama Nation Review and other publications. Ms. Townsend has also worked as a broadcast trainer for the Native American Journalist’s Association and with NPR’s Doug Mitchell and as a freelance editor. Townsend is the recipient of numerous awards for her work from the Alaska Press Club, the Native American Journalists Association and a gold and a silver reel award from the National Federation of Community Broadcasters. Townsend was the recipient of a Fellowship at the Metcalf Institute for Marine and Environmental Reporting in Rhode Island as well as a fellowship at the Knight Digital Media Center in Berkeley. She is an avid reader, a rabid gardener and counts water skiing, training horses, diving and a welding certification among her past and current interests. ltownsend (at) alaskapublic (dot) org  |  907.550.8452 | About Lori