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Parnell removes oil taxes from special session

Associated Press Modified: April 25, 2012 at 10:45 pm •  Published: April 25, 2012

JUNEAU, Alaska (AP) — Gov. Sean Parnell on Wednesday pulled oil taxes off the Legislature's special session call, saying the Senate "appears incapable of passing comprehensive oil tax reform."

The stunning decision came just one week into a special session intended to deal with three issues: oil taxes, an in-state gas line and human trafficking bills.

The trafficking bill was taken care of last week, so that just leaves HB9, the pipeline bill. Senate President Gary Stevens said Senate leadership would meet Thursday morning to discuss what they want to do with the measure, which is in the Senate but faces a tough road.

Parnell's announcement on a 6 p.m. TV news broadcast came amid mounting criticism of his bill and what some lawmakers, particularly senators, saw as an inability of his administration to adequately defend its plan.

Parnell's bill borrowed from a proposal the Senate passed during the last weekend of the regular session, providing a tax break, or "production allowance," for the first 10 years of production from new fields on the North Slope. But it also cuts taxes for existing producers and allows tax incentives for well-lease expenditures, provisions more in line with HB110, a tax-cut bill he pushed last year that stalled in the Senate.

His proposal faced skepticism, if not outright rejection, from senators from the start of the special session. Some saw it as nothing more than a repackaged version of HB110. A legislative consultant this week said it takes an approach that winds up giving oil companies "quite a lot" of money for projects that are economically viable today.

Sen. Lesil McGuire, R-Anchorage, who said she agrees philosophically with Parnell on the need to make Alaska a more competitive place for industry investment, last week called the plan "half-baked" and told Revenue Department officials she didn't think they understood the ins-and-outs of the bill.

"And we all know it's going to end in a train wreck, and now it's just a matter of who gets to be blamed for it, and I think that's silly," she said.

The Senate spent two months during the regular session delving into the oil tax issue, but an overhaul of Alaska's tax structure stalled in the Senate's bipartisan majority during the last days. A major stumbling block was how best to address legacy fields like Prudhoe Bay and Kuparuk, the mainstays of Alaska's oil industry, where production has been declining.

One of the concerns was with giving too much money to oil companies, particularly for oil they would have produced anyway.

Sen. Bert Stedman, R-Sitka and co-chair of the Senate Finance Committee, said before Parnell's announcement that he felt that lawmakers increasingly were moving away from tax breaks for legacy fields. He said if there was a choice between Parnell's plan and nothing, it would be nothing.

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