Voices of Alaska: Tax loopholes for oil companies need to be closed

  • By Reps. Les Gara and David Guttenberg
  • Saturday, April 2, 2016 5:57pm
  • Opinion

This coming year Alaska will pay more to oil companies in “tax credits” than we receive in Oil Production Taxes — for the third year in a row. It gets worse. The Department of Revenue forecasts that tax loopholes will provide Alaskans with NO Oil Production Tax revenue for the next decade — from any future oil fields, and from any fields that started after 2002. That’s a great deal if you can get it.

A recent opinion piece echoed what many corporate representatives and lobbyists have come to Juneau to pitch. Much of corporate Alaska has lined up to say the burden of Alaska’s $4.4 billion deficit to be placed on someone else. The recent op-ed argues oil companies should keep all lucrative tax exemptions, and not chip in to help with our record deficit even when oil prices rise and oil companies earn healthy profits on our oil.

Get in line gentlemen, as you join those who’d drive Alaska towards a recession, and turn a blind eye towards proposed harmful budget cuts to people with disabilities, seniors, and to those who deserve quality public schools and a strong University.

We’re in this together. We should work together for a fair, balanced, and smart approach to put this state on a path to a bright future, not a dim one. We want an Alaska where people want to raise their children, not an Alaska where parents and students start thinking about taking their talents elsewhere.

Cuts to wasteful spending should certainly be part of a fair plan, and we voted to cut $700 million from the budget last year. But we’re not OK with continuing cuts that go far beyond waste, that now include proposed budget cuts to Alaskans living with disabilities, seniors who helped build this state, and children. There’s a difference between spending on multi-billion dollar megaprojects, and an overpriced Legislative Office Building, which we’ve voted against, and cuts to opportunity and dignity.

That’s why we can’t agree to join the gentlemen who wrote the op-ed. Protecting expensive oil tax exemptions leads to a future where the budget will be cut with a chainsaw, and not a scalpel.

Here are a few things you should know.

According to the Department of Revenue the oil tax law adopted in 2013 is predicted to bring Alaskans exactly zero dollars in Oil Production Taxes from every field that’s gone into production after 2002, and any future fields until 2026.

Why? Current law has a bargain basement tax rate on all post-2002 oil fields. It is zero at current $35-$40 oil prices, and still zero all the way up prices of $73 per barrel when companies generate good profits.

What about our older oil fields? The 2013 law has a small four percent emergency “oil tax floor” for fields started in 2002 and before. That minimum tax makes some sense at current low prices. But it remains in place all the way up to oil prices of $76 a barrel — prices where companies make healthy profits. In fairness, that tax floor should modestly rise as prices and company profits rise. And rules allowing companies to get around that “tax floor” should be fixed.

The op-ed also says Alaska reaps “big dividends” because of these loopholes. They claim the 2013 law is responsible for a great turnaround in oil production. Here’s the truth.

Every new oil field since the 2013 oil law passed, and every field that companies have announced will go into production in coming years, was already being invested in before 2013. Investment in these fields was already moving forward. The biggest, “CD-5” in Alaska’s National Petroleum Reserve, was announced before 2013, but was slowed by a wrongly delayed federal bridge permit. Exxon’s Pt. Thomson will soon move forward because the state sued, nearly a decade ago, to force that field from idleness into production. That case was settled in 2012.

Most Alaskans are willing to support a fair, balanced budget plan. That plan will lose public support if it carves out special interest exemptions for our partners in the oil industry.

Reps. Les Gara (Anchorage) and David Guttenberg (Fairbanks) are Democratic members of the House Finance Committee. They can be reached at rep.les.gara@akleg.gov and rep.david.guttenberg@akleg.gov.

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