Skip to comments.Alaska battles over how lifeblood oil is taxed
Posted on 04/01/2011 5:27:36 AM PDT by thackney
A high-stakes political battle is being waged in Alaska over whether to cut oil production taxes, an issue that could determine whether the trans-Alaska pipeline keeps pumping billions of dollars into the states coffers.
On one side are Gov. Sean Parnell, top House Republicans and the oil industry, who argue that the current tax structure is stifling investment and must be changed to boost oil production and avert a now-looming shutdown of the pipeline that carries at least 10 percent of the nations crude oil production, on average.
On the other side are House Democrats and leading senators, who say the Parnell administration hasnt justified the need for tax cuts and credits that could cost up to $2 billion a year, and they question what if anything the state will get in return.
(Excerpt) Read more at fuelfix.com ...
The Alaska House of Representatives voted Thursday night for a massive rollback of the oil profits tax that the lawmakers put in place four years ago.
The vote, after about three hours of debate wound down after 8:30 p.m., was 22 to 16.
Neal Foster of Nome was the only Democrat to vote in favor. Alan Austerman of Kodiak and Paul Seaton of Kodiak were the only Republicans to vote against. Sharon Cissna, D-Anchorage, and Mark Neuman, R-Wasilla, were excused.
The House vote was an attempt to torpedo one of the biggest legacies of Gov. Sarah Palin’s time as governor. Gov. Sean Parnell supported the oil tax when he was her lieutenant governor but is now leading the effort to weaken it, saying he's since become convinced that it hurts oil company investment.
“It requires us to believe, it requires a partnership with industry, it creates a balance in Alaska's oil tax,” said Eagle River Republican Rep. Anna Fairclough.
“Gov. Sean Parnell supported the oil tax when he was her lieutenant governor but is now leading the effort to weaken it, saying he’s since become convinced that it hurts oil company investment.’
Sounds like fodder for the MSM should they be unable to stop Palin from winning the nomination.
Will this bill effect Alaska resident annual rebate?
When oil prices are $100 a barrel, the total marginal government take in Alaska is 82 percent. In Alberta, its 55 percent. In the Gulf of Mexico, its 43 percent. Alaska is simply not competitive under ACES.
Without this bill, there will be greater reduction of oil exploration and future oil and natural gas production.
Key words to always pick out in statements by Dems: Tax cuts DON’T COST ANYTHING!!
Ok, my rant is done.
What does Sarah say about this? I’d trust her more than anyone else up there.
It was part of the reason I left Alaska and returned to Texas to a more business friendly environment.
Many jobs were lost and projects canceled. Many of Free Republic don't want to acknowledge it, but the job loss and reduction of work, while other areas grew is documented.
Under ACES, Ak has put away 15 billion over the last 3-4 years. My state legislator told me the tax figure was 62% and he was leaning on voting for it. The problem is there are no guarantees on development even with the tax reduction. Did the feds give oil any tax reduction? Of course not. They are setting tax policy for 10 years down the road. I believe most Alaskans think oil will be $150/barrel pretty quick and any tax reduction will cost Ak over 2 billion/ year in revenues.
Bottomline, the Senate isn't buying into the tax reduction and I heard from my Senator and read in the paper that this is the truth.
The oil is owned by the people & state of Alaska. I think most Alaskans believe somebody somewheres will want the oil still in the ground someday, maybe it will be when it is 200/barrel. Leave it sit until that day gets here.
In the Senate, even the Repubs ain't buying this new tax reduction. No offense, the oil is a resource that funds Ak govt; not a give away to be fuel govt corruption. Palin did the right thing, parnell is unelectable and will cause a dem to be our nx Ak governor. What a crook and a shame. He's a shill for big oil and nothing else and you will honestly find most Alaskans feel that way about the issue.
Interesting. Thanks for the insight as I am not up on the industry there.
Did you ever do anything with oil wells and Chlorine Dioxide?
My side has been design and construction of the above ground facilities.
I really have not had experience with the drilling. My work takes place after drilling is completed and the oil needs to get processed and brought to market.
One of the sources of information for after ACES is the number of workers and dollars immediately after it was implemented.
Most major Alaska North Slope projects takes 4~5 years to put in place at the quickest pace. I'm talking about best case from the decision to spend money to time it is flowing oil. Some projects take even longer.
Most of that time is due to the weather. Most major projects require module fabrication to build in Anchorage or outside. Shipping of the large modules must be scheduled with the winter travel permits for heavy loads.
The reality is, regardless of who wants to believe it, projects that were substantially underway continued. If equipment was ordered and prefabrication begun it was finished with construction being completed the following year on the slope. So the following year there were quite a few hands working and big dollars spent as construction has most of a project cost.
But the engineering and planning for new projects and projects being considered was mostly shut down. That was the side I was on. I saw the immediate impact because I worked on the front end. The engineers and designers working new projects was drastically cut. At some places by 2/3 or more. And I keep in contact with a couple folks in that still. It has barely picked up with the rising oil price of the last year.
Until they get more competitive with other areas, Alaska is going to see little investment. ConocoPhillips, BP, Anadarko, ExxonMobil are working in Canada, Oil Shale, Brazil and other places. It is hard to justify $5 billion dollar project in Alaska that would have half the return the same money spent in the Eagle Ford Shale or offshore Brazil.
Personally, now that I work outside of Alaska, I probably benefit directly from their high taxes for the work load now in Texas. It is becoming a busy time again, especially considering the Natural Gas work from Shale. So I don't push this issue for my own gain. 5 years ago someone could make that argument for me but not today.
That’s a depressing graph for Alaskans. Oil is the life of this state.
There's a name for that system.
The need for new field development is critical NOW, not later. Production has fallen off over 40% and dropping daily.
ACES was a complete failure and waste of time, when there was already a resource sharing program in place since 1976 which paid all of Alaskan Income taxes and an annual dividend of over $1,000 for every resident. It also paid over 75% of all of Alaska's operating costs.
Palin’s additional tax did exactly as you have pointed out. It stopped new investment and exploration and has reached the point where it will break the industry.
Having 12 to 15 Billion dollar surplus in the state treasury today is nothing to brag about. It merely indicates that the industry has been over taxed and unreasonably punished in order to take advantage of a Populist belief that “corruption” has been defeated and exposed. And the result is a glut of money overtaxed and stored in the State Treasury and out of the Oil Companies reach to use for new drilling and exploration.
Reality is much different than that. It has resulted in many families who have had to leave Alaska and less jobs or opportunity for the future of the state. These are good, hard working people who contributed to the good of the state, not corrupt and evil “Big Oil” cronies like the Populists here love to label them with.
When any Government over taxes and claims victory by bragging about the “surplus” their “smart” leadership has created, it merely shows that they have a belief that Government has a right to confiscate wealth and redistribute it to who they see fit.
This is one of the MAIN reasons that I will not support Sarah Palin.
>Why? It was Palin who called for and pushed this obscene tax on profits through.
We have watched the oil industry come back every year crying for tax reductions. It has caused massive state govt corruption with many of our Repubs being sent off to the big house. Palin straightened everything out, and said ACES didn't need changing. I trust her word way over big oil and now see the oil industry attempting to buy off the Senate too. They won't go as cheap though. Half the REpubs up here are against the tax reduction. They know what will occur. The state will spend the 14 billion they have in the bank from ACES, they will call for state taxes, Repubs will go to jail like before for corruption, and finally the people will vote in a dem governor in disgust. You wait and see. My own corrupt Repubs are responsible for this too. Big Oil will buy the dems just as quick too. I sure hope the Senate has more sense.