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Note from Rep. Les Gara
Note from Rep. Les Gara  
Action Alert Part Two:
Saturday Oil Tax Bill Public Testimony
Note from Rep. Les Gara

March 24, 2017

Voice Your Opinions!

Letters to the editor make a difference. You can send a letter of up to 200 words (shorter letters are more likely to be accepted) to the Alaska Dispatch News by email (letters@alaskadispatch.com); or by fax or mail (call them at 257-4308). Send letters to the Anchorage Press via e-mail editor@anchoragepress.com or by mail to 540 E. Fifth Ave, Anchorage, 99501. Feel free to call us if you need factual information to help you write a letter.

Contact the Governor. The Governor can be reached at 269-7450; or www.alaska.gov.

Contact us. My office can be reached at: 1500 W Benson Blvd, Rm 216, Anchorage, AK 99503; by phone: 269-0106; visit my website at http://replesgara.com; or email: Rep.Les.Gara@akleg.gov

Want to Volunteer To Help A Child?

You can be a Volunteer Mentor to help a child, through a program we worked with foster care advocates to start, at Big Brothers, Big Sisters.  Just call433-4691. Have the time to do more?  Alaska has a major shortage of foster and adoptive parents, and you can help change a life by doing that.  To ask about foster parenting or adopting a child out of foster care call 1-800-478-7307.  And, of course, we are always asking people to donate tax deductible new or used (good condition only) laptops for current and recent foster youth.  You can contact us if you'd like to do that.

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Dear Neighbors:

I only bombard you with E-Newsletters two days in a row if something important has come up. Or when I forget after 24 hours that I just sent one the day before (that happened once).

Tomorrow we not only have our constituent meeting at the Fairview Recreation Center from 11:30 – 1:30, there with ALSO be public testimony on House Bill 111 which works to limit unaffordable oil company subsidies and attain a more fair oil tax.

Currently we are projected to let companies “earn” more in tax credit subsidies next year than we get in production taxes.  That’s legislative speak for the fact that we will let more in oil tax subsidies accrue for next year than we will get in production taxes.  That’s a negative production tax. 

In future years, unless we fix things, we will receive very little in production tax revenue when we are battling a near-$3 billion budget deficit.  This, at a time when schools are receiving $30 million less in classroom funding than they did three years ago, and Senate Republicans are talking about another $65 million in education cuts, which could lead to the loss of hundreds more teachers than the 90+ teachers Anchorage is already poised to lay off. 

I want a state where our oil tax, and fiscal policy, don’t require children and seniors and all Alaskans to live with harm and austerity.  Austerity means cuts to disability services and the things that give people dignity in life.  There is a difference between making reasonable cuts to the budget, on top of the $3.4 billion we have already cut, and leading this state off a cliff.

Here are a few more facts on our oil policy that should be changed:

Alaska is an attractive place to do business.  The complaint from oil companies that they struggle in Alaska is overstated. Here are Conoco’s most recent annual reports.  Conoco is the only company required by federal law to break out their Alaska profits. Other companies keep their financial information secret while asking for tax breaks.

The reports show Conoco earned a quarter billion in Alaska profits in 2016, at a very low average oil price of about $41/barrel. At the same time, they lost significant amounts of money in most other regions of the world. The Fourth Quarter published annual report – the most recent we have -- shows significant financial losses in the Lower 48 and Canada, and lower profits for all of the Middle East and the Asia Pacific combined. In 2015, they broke a little better than even in Alaska, at exceptionally low oil prices below $40/barrel, but lost over $1 billion in the Lower 48, $854 million in North Africa and Europe, and $463 million in all of the Middle East and the Asia Pacific region.

The 0% and 4% Miniscule Production Tax Problem.  The average North Slope field pays a minimal 4% production tax, at current prices and all the way up to $73/barrel, leaving Alaska in austerity.  Most fields started after 2002 pay an even lower so-called “new oil” tax rate of 0%, for the first 7 years, at all prices below $70/barrel.

I think we can look at where the average North Slope Field makes profits  (roughly $42/barrel next year, and a lower price for older, bigger fields), and consider slightly increasing the 4% tax as profits rise --5% at $50/barrel, 6% at $56/barrel and 7% at $62/barrel for example. This could fairly leave companies profitable, and get Alaska $120 million in additional revenue at $56/barrel and likely around $200 million in a needed fair share at $70/barrel.  It’s a modest increase and it’s fair to companies.

And what if we have a new, very expensive to produce field?  How would this be fair in that case?  The state has a tax adjustment mechanism if the production tax is too high for a particular field.  Under our Royalty Relief law, companies can receive, depending on the field, a 7.5% - $13.5% TAX PAYMENT (Royalty) REDUCTION if they prove a new tax is too high.  That is, they can get a TAX REDUCTION FAR GREATER than what I propose as a tax increase, fully offsetting it and more. With proof they need tax relief, they can make the tax rate even lower than the low rate they enjoy today under current law.  But they have to prove, by opening their books, that they need the royalty reduction. They can’t just claim it, with no reviewable evidence, with soundbite committee statements.

Changing our tax model in this way, and reducing the unaffordable hundreds of millions of dollars a year we give companies in oil tax credits, and replacing them with more effective and affordable incentives, would do us well.

Testimony: Public testimony for HB 111 will be heard from 10:00 AM - 2:15 PM tomorrow (3/25). The teleconferencing system for committee meetings has a limited number of phone lines, and because of this, you are encouraged to testify from your local Legislative Information Office (LIO). If it is not possible for you to testify at an LIO office, please call the Juneau LIO at (907)-465-4648. They can assist you in connecting to the meeting and answer other questions you may have during this time.

I hope you can call in!

As always, let us know if we can help.

My Best,

[signed] Les Gara


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