NEWS: Gara Asks Governor To Admit Zero Worth Provision In SB 21

Rep. Les Gara

Legislator Concerned Tax Scheme Short-Changes Alaskans

FOR IMMEDIATE RELEASE: JULY 24, 2014

Today, Representative Les Gara (D-Anchorage) called on Governor Sean Parnell to acknowledge a special interest provision in SB 21 that gets Alaskans nearly no production tax value, or even a negative worth for Alaska’s oil. 

“Alaskans should be told when they are being shafted,” Rep. Gara said. “The administration needs to be straight with them.  No business would give away its products for nothing, but under SB 21, Alaskans – the owners of our oil – receive no money or even pay to give away much of our current and a growing portion of our future oil.” 

Gara has filed legislation to get Alaskans a fairer share, and provide industry with smarter, more effective investment incentives. 

“I believe the state can do better that just give away our oil through a production tax that yields nothing, or worse,” Gara said.  “This special interest provision will harm our schools, cut road and construction jobs, and hurt businesses when job losses start snowballing under this path to poverty.”

The provision of SB 21 that gets the state a near zero or negative production tax worth is reported in a little-mentioned section of a report touted by the oil industry and written by Scott Goldsmith. His report on this “Gross Value Reduction (GVR)” provision shows Alaska gets nearly nothing, or even loses money to the oil industry because of deductions and tax credits that exceed the worth of oil at this low tax rate.  The GVR applies to all oilfield units approved in and after 2003, and into the future.

Those units include many that went into production under the previous tax scheme (“ACES”) after 2003, fields companies announced they were developing towards production during ACES, fields that will be in production soon, and all future fields. Goldsmith states these fields are taxed at a 13% tax rate, or one of the lowest in the world. 

“As older fields decline, and post-2003 oil fields take their place, Alaska’s effective tax rate will fall towards this fire sale rate of 13%,” Gara said.  “Pre-2003 fields pay a rate Goldsmith estimates, at current prices, at approximately 27%.  That rate will keep falling as post-2003 oil replaces declining oil from pre-2003 oil fields.”

A copy of Rep. Gara’s letter is available here: http://akhouse.org/gara/072414_Gara-to-Governor-Parnell.pdf

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