JUNEAU — Democratic House majority members on Wednesday proposed changes to an Alaska tax credit program that financially rewards oil exploration and production but is seen by critics as too pricey amid a multibillion-dollar state deficit.
The bill was introduced on behalf of the House Resources Committee by co-chairs Geran Tarr and Andy Josephson, both Anchorage Democrats, over the objection of minority Republicans who didn’t want their names associated with the proposal.
The measure would, among other things, raise the minimum oil production tax and eliminate cash payments for future credits earned by small producers and explorers. State Tax Division Director Ken Alper said the bill appears to apply to credits awarded in 2018 and beyond and that current credits would remain cashable.
Tarr told reporters the state has an overly generous system of credits and sees the bill as a starting point for discussions.
Alaska Oil and Gas Association President Kara Moriarty said she doesn’t think the public recognizes the magnitude of the changes made last year and said provisions in the new bill will negatively affect the industry.
Gov. Bill Walker recently said he doesn’t see how the state can have a complete fiscal plan without addressing oil taxes and credits.
The state faces an estimated potential credit obligation of about $1 billion, including credits expected to be earned in the coming year and those deferred due to limited funding.
Walker has used his veto authority the last two years to limit funding for credits, citing concerns with cost and the lack of a plan to tackle the deficit, which has been exacerbated by low oil prices.
Senate Resources Committee chairwoman Cathy Giessel, an Anchorage Republican, has said that lawmakers have made strides in reducing credits but that Walker’s vetoes had complicated matters by compounding costs.
The last decade has been marked by fights over oil taxes in Alaska and a struggle to find a balance between establishing a system that will entice companies to the North Slope and ensuring Alaskans receive a fair share for what’s developed.
Credits have been seen as a way for the state to share in front-end costs in the hopes of reaping benefits once oil flows. The 2014 collapse in oil prices prompted another re-examination of the system.