After Tight Senate Vote, House Takes On Oil Tax Bill

The House gets its first stab at the Senate’s oil tax package Friday.

The bill, which gets rid of a mechanism that raises the tax rate on oil as the price per barrel goes up, will be taken up in the resources committee. Co-chair Eric Feige, a Chickaloon Republican, says their goal with the bill is to bring Alaska’s oil tax rate down without undercutting states like Texas and North Dakota.

“I think our objective will be to place Alaska pretty close to the center of the competition, probably a little bit above the middle, if you will.”

The bill was first introduced by Gov. Sean Parnell, and the current version puts the base tax on oil at 35 percent while offsetting that with a $5 per barrel credit. But the governor’s original bill established a 25 percent flat tax. The difference between them comes to about $300 million in state revenue every year at forecast levels of production.

Feige offered support for the governor’s draft early in the session, calling it a “great starting point.” But he says that his committee is unlikely to bring the tax rate down to that level.

“Is it going to go all the way back to 25 percent? Probably not,” says Feige. “I don’t think there’s the support in the legislature to bring the base rate back down there. In the end, we’ve got to get get 21 votes in the House, keep 11 votes in the Senate. So we’ll proceed accordingly.”

The bill that moved out of the Senate on Wednesday got the minimum votes needed to pass, and key supporters have said that they don’t want the House to implement deeper cuts.

As the bill progresses through the House, one item that municipalities are expected to pay attention to is the treatment of the state’s community revenue sharing fund. That money is used to supplement city and borough operating budgets, and it comes as piece of the progressive tax feature the bill plans to wipe out. 

The new bill doesn’t tie any percentage of oil tax revenue to the fund. It just allows the legislature to appropriate money to the fund at their discretion. Feige says he doesn’t have a problem with that policy, and he describes it as an accounting change that shouldn’t affect the program.

“But do we need to specifically say that the source of that revenue sharing money is coming from a particular place in our revenue stream? No, it’s just going to come out of general fund,” says Feige. “So, I don’t see anything untoward with the way SB21 has addressed that.”

An amendment that would have applied more specific guidelines for replenishing the community revenue sharing fund failed narrowly in the Senate on Wednesday night.

The resources committee has hearings scheduled through all of next week. The plan is to take testimony from the major oil producers on Tuesday, followed by smaller companies on Wednesday, and then offer changes to the bill later in the week.