Revenue Commissioner Bryan Butcher said his department did a five-year review to see how the state was benefiting from the credits. "We could show that we're getting a lot of spending as a result of them, but we didn't see the connection to production that I think would be hoped (for) when these tax credits were put on the books initially," he said.
Parnell's proposal keeps the 25 percent base tax rate and includes a tax break for oil from new fields, including new areas of Prudhoe and Kuparuk. It keeps in place credits for exploration but eliminates credits for qualified capital expenditures on the North Slope. It gears other credits toward production of new oil.
By eliminating the surcharge and changing the tax credit system, Parnell said, "we restore that balance. We promote production and simplicity. It's a new way of thinking about our fiscal regime."
"Sometimes we get locked into one way of thinking, that there's only one way to solve the production challenge that Alaska faces. And we have been focused on trying to modify progressivity and tinker with the levers of the existing system when really we ... are paying out tax credits now in significant amounts and collecting a lot of revenue at high oil prices to cover them," Parnell said. "But the state's at risk if and when oil prices go low again, because we're still responsible for those credits, but we won't have the revenue to cover them."
The administration hired a consultant during the interim to take a fresh look at the issue. The departments of Revenue and Natural Resources also were involved.
Some lawmakers have introduced bills of their own to address oil and gas taxes and tax credits. Rep. Les Gara, D-Anchorage, said House Democrats also plan to introduce a bill to address production.
Follow Becky Bohrer on Twitter at http://twitter.com/beckybohrerap .