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Panel: Tax likely contributed to continued decline

Published on NewsOK Modified: February 7, 2013 at 8:24 pm •  Published: February 7, 2013

JUNEAU, Alaska (AP) — A Senate panel said Thursday that Alaska's oil tax system likely helped advance the decline of oil production in the state, but it expressed misgivings with Gov. Sean Parnell's approach to addressing the issue.

The special committee on oil flow through the trans-Alaska pipeline said its decision to send Parnell's oil tax bill on for further review was "in no way an expression of support" for the measure in its current form. A letter of intent from the Republican-led panel referred to SB21 as "an adequate platform from which a respectful dialogue can begin" but said most of the committee's members have concerns that would have to be addressed before they could support the measure.

Parnell, who is also a Republican, has proposed sweeping changes to Alaska's oil tax structure, aimed at making the state more competitive and encouraging new production. His plan would eliminate the progressive surcharge that companies say is a disincentive to new investment and revamp a suite of tax credits, focusing incentives on companies that produce new oil on the North Slope. It would retain the current base tax rate.

The idea behind the current tax structure, passed in 2007, was that the state would help oil companies on the front end with things such as tax credits, and share profits on the back end when oil flowed and prices were high.

Tax credits under the current system could top $1 billion next fiscal year alone, and Parnell's revenue commissioner has said he has seen no evidence the credits have led to increased production.

Parnell has said he wants to restore balance to the system, and make it simpler and durable. He said he also wants any tax plan to be fair to Alaskans. Parnell said Wednesday that if legislators want to propose something different, he's open to that, but his decision-making will be guided by those principles.

On Thursday, he thanked the committee for its work.

"There is little disagreement that our current system needs to be fixed, and so I look forward to working with the Legislature to create more economic opportunities for Alaskans," he said in a statement.

Joe Balash, a deputy Natural Resources commissioner who has helped carry the bill, said the administration fully expected that the bill introduced would not be the bill enacted. He said the conversation will continue and the administration looks forward to going more in-depth into what it has proposed.

The panel did not change the bill, though four amendments were offered by the lone minority member, Sen. Berta Gardner, D-Anchorage. Instead, it advanced the measure to the Senate Resources Committee with an accompanying letter of recommendations. Those include having lawmakers evaluate applying to existing fields a tax break proposed by Parnell for new fields and new areas of legacy fields, and using progressivity to level the proportion of state take across a range of oil prices.

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