Refuses to Defend SB 21 Provision Goldsmith Report Shows Gets Alaskans Near Zero or Negative Production Tax Worth On All Post-2003 and Future Fields
FOR IMMEDIATE RELEASE:
AUGUST 13, 2014
Governor Parnell has had three weeks to defend a special interest provision in SB 21 that gets Alaskans either a near zero, or even negative long term Production Tax Worth under his controversial oil revenue rollback, SB 21. Rep. Les Gara wrote Governor Parnell on July 24 to ask for his defense of a zero or negative value oil tax provision. Parnell has refused to defend a provision that gets Alaskans little, or possibly a negative worth for fields that went into production under ACES, fields committed to go into production during ACES, and all post-2003 and future oil fields.
“Negative or zero oil tax value on all future oil fields, and all fields after 2003, was never once mentioned in a legislative hearing before SB 21 passed. Governor Parnell now refuses to defend this special interest gift to Exxon and others because it is indefensible,” said Gara.
“A zero-value tax is a recipe to continue firing teachers, draining savings, and cutting construction, public safety and thousands of other important jobs and economic development,” said Gara.
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 so-called “Gross Value Reduction (GVR)” provision shows Alaska gets nearly nothing, or even gets a long-term negative production tax value. The GVR applies to all oilfield units approved after January 2003, and all new fields in the future.
“Perhaps the most offensive example of this is Exxon’s Point Thomson,” Gara said. “That field sat illegally idle for 30 years. Then, under the previous tax law – “ACES” – the state took legal action to force Exxon to move ahead with development and production. Exxon gets a reward for breaking the law,” Gara said, noting the settlement during ACES that forced Exxon to develop Pt. Thomson.
Goldsmith states these fields are taxed at a 13% tax rate, or one of the lowest rates in the world. They barely or never cover the state’s up-front costs paying for development of these fields with tax rebates and deductions.”
“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 in his report at current prices, of approximately 27%. That rate will keep falling towards the 13% rate as post-2003 oil replaces declining oil from pre-2003 oil fields. Alaskans don’t get a tax rate that falls every year, and treating corporations better than people is wrong.”
Rep. Gara can be reached at 250-0106.