Leg with Louie – April 20

“Oil hits $70. Now What?” asks the Anchorage Daily News today.

Now What? Here is what, Brother Binkley: Now the legislature should change the oil tax laws so we aren’t the hoodwinked rubes that our “partners” in the oil industry know we truly are.

Our oil tax system is clearly, fundamentally, and fatally incapable of doing the job assigned to a Tax. According to the Alaska Department of Revenue Tax Division (and this might be a good ADN headline) total oil tax revenue has dropped from $9.7 billion to $1.5 billion in 4 years.

A lot of our problem is self inflicted, and that drop in our oil money is the product of SB 21 coupled with average global oil prices. The 35% oil tax rate on the books in Alaska is not ever actually paid by a taxpayer. Through complex and generous loopholes, companies are now usually paying only a 4% minimum tax rate, if that.

We provide an 20% Gross Value Reduction on oil that is not part of one of the historically proven reservoirs. We also give a credit of up to eight dollars per barrel to global companies just for producing oil they are already producing – we give them a monetary reward for making money. On oil that is not part of a proven legacy field, in addition to the 20% tax reduction we add on a $5 per barrel credit as though the act of a global company making lots of money discovering new oil were akin to a March of Dimes charity event.

Woe unto the policymaker who proposes a one cent per barrel surcharge on oil to fund climate change adaptation efforts in Alaska – companies cannot afford it, case closed.

Global petroleum interests and their flacks on the ground in Alaska like to remind us that regime stability is important. At the same time, they like to destabilize our electoral system with lots of money, helping to elect politicians who pass extreme legislation – like SB 21 – which is so egregious that subsequent legislatures spend much of their valuable time discussing remedies to the law. Tax stability is gibberish. Stability means static tax laws, which makes no sense given rapidly changing economic and political situation we confront in the actual world.

Lucky for us the rote repetition of “stability” for PR and other purposes does not sanctify it. The House Finance Committee has introduced and heard HB 411 which would end the per-barrel credit system and potentially raise $600 million per year.

The House Resources Committee has introduced and heard HB 288 which would raise the minimum tax floor from 4% to 7% raising approximately $200 million annually.  

These reforms appear to make sense at a time when we are going broke. These measures should form a key part of a real fiscal plan – still within reach this session, with just a pinch of political bravery.

-Louie Flora, Government Affairs Director


Hearings to Watch This Week

The House and Senate have appointed conference committee members to negotiate the operating budget, which triggers the “24 Hour Rule” at which point committee meetings only require 24 hour notice. Things move fast at the end of session, so be sure to monitor the AK Legislature website for daily updates.

The Conference Committee assigned to hash out differences between the House and Senate on the Operating Budget (HB 286) will be meeting over the weekend, and into next week.

Stay Alert – Ak leg on 24 hour notice

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