FEBRUARY 10, 2017
Carrying Alaska North to the Future
Dear Friends and Neighbors,
Let’s talk oil in Alaska.
Right now, the oil industry is required to pay a minimum tax rate of 4% for every barrel they pump out of Alaska, and this 4% is not a fixed rate. Corporations can apply subsidies and concessions to reduce the cost of doing business in Alaska, and that minimum 4% tax rate? It’s flexible. In addition to this flexible minimum tax, our current oil and gas tax system has overly generous subsidies that have become unsustainable. The intention was to offer economic incentives to small oil companies as a way to encourage oil production because the Big Three aren’t doing as much exploration and development work and production is down.
But because of these economic incentives, Alaska potentially owes oil corporations an estimated $1 billion dollars in credit obligations. It’s important to note that oil corporations do not have to share their annual net profits or losses with the public, either. This $1 billion dollars is on top of our state’s current multi-billion dollar deficit, which is why Governor Walker has vetoed paying these credits the last two years.
2014 was only the start for having discussions about how we do business with oil corporations in Alaska.
For 2017 and beyond, we have to do business differently. For 2017, the House Resources Committee is calling for a hardening of the tax floor, meaning credits can’t be used to reduce the taxes to zero or even below zero; a 5% minimum tax rate; and a re-examination of this oil credit system through House Bill 111.
Introduced on Wednesday, House bill 111 will decrease the net operating loss credits that some oil companies use to lower their current and future tax liability to the State of Alaska. It will reduce the net operating loss credit from 35% of a company’s losses to 15% and caps net operating loss credits at $35 million a year. HB111 also reduces the per barrel credit given to oil producers, which could result in another $100-300 million dollars in revenue to the state if oil prices reach $70 per barrel or higher.
As co-chair to the House Resources Committee, I acknowledge that HB111 is not in its final form. There willbe multiple hearings, discussions with colleagues, and opportunities for Alaskans to comment. The next discussion will be this upcoming Monday, February 13th at 1:00pm in the House Resources Committee. At the Resources Committee, we will be leading a sectional analysis of HB111. Monday is just the first day so the committee will not be taking testimony yet, but you can watch the hearing online at www.akleg.tv – click “Live Now.”
During this time, I ask you to remember when former Governor Sarah Palin made tax rate changes to the oil industry in 2007, including progressivity where the state benefits in the windfall profits that companies earn during times of high oil prices. This brought in $1.6 billion more annually for the state. At that time, oil corporations said the same things they are saying now: “this will hurt our ability to invest in Alaska, this may cause us to explore elsewhere.”
If we don’t change how the state functions, the people of Alaska will not be able to invest in their own Alaska. Alaskans do not want to explore elsewhere. This is our home, we want to live and invest in the Last Frontier. Oil cannot be our sole source for revenue anymore. The state reforming oil subsidies is only one of many budgetary suggestions we are making to carry our Alaska north to the future.
Upcoming events to look out for: I will be at the Anchorage Caucus meeting on February 25th from 12-2pm at the Anchorage LIO, located on 1500 W. Benson Blvd (the old Wells Fargo Building).
On March 11th from 2-4pm at Clark Middle School, Senator Begich and I will be hosting a constituent meeting—come say hi! We want to hear from you!
I also wanted to celebrate 2-1-1 ‘s milestone for answering their 200,000th call for help! Check out their snapshot below.
Alaska 2-1-1 answers 200,000th call for help
Alaskans know help starts with 2-1-1 and this milestone reflects that. The call came on February 2nd from an Anchorage resident seeking assistance with health care. Check out the newly released 2016 Alaska 2-1-1 Report for a snapshot of the vital resource hub that helps so many Alaskans, thanks to your support!