Resources Committee Bill Will Focus on Unsustainable Oil Industry Subsidies
FOR IMMEDIATE RELEASE
February 8, 2016
Juneau – The co-chairs of the House Resources Committee, Reps. Geran Tarr (D-Anchorage) and Andy Josephson (D-Anchorage), have introduced House Bill 111 to fix Alaska’s current system of oil and gas subsidies in the form of tax credits. The bill fixes many of the flaws remaining in the current oil tax credit system after passage of House Bill 247 last year.
“We can no longer allow the overly generous system of oil and gas subsidies in place today. The dollars owed in subsidies would be better spent to keep State Troopers in our communities, teachers in our schools, and plows on the roads,” said Rep. Tarr. “I just read that the Anchorage School District is considering laying off 99 teachers. That’s unacceptable. We can remain competitive and have a strong oil and gas sector, but we simply can’t afford the current level of subsidies in this new low-price environment.”
HB 111 seeks to fix several flaws in Alaska’s oil tax regime, including hardening the minimum tax floor. Currently, oil companies can use provisions in law to reduce production taxes significantly below the intended 4 percent minimum rate. The bill also seeks to decrease the net operating loss credits (NOL) that some oil companies use to lower their current and future tax liability to the State of Alaska. HB 111 reduces the net operating loss credit from 35 percent of a company’s losses to 15 percent and caps NOL’s at $35 million a year. The bill also reduces the per barrel credit given to oil producers, which could result in another $100 million to $300 million in revenue to the state if oil prices reach $70 dollars a barrel or higher.
“This is commonsense legislation to fix problems in our tax policy that unfairly shifts benefits from the state to the oil and gas industry,” said Rep. Josephson. “Our intent is not to gouge the industry for more money to avoid the hard and necessary decisions that must be made to overcome our fiscal challenges. Rather, we want to make necessary changes to the current tax regime in an effort to strengthen the partnership between the industry that extracts and markets the resources, and the State of Alaska, as the owner of the resources. Let’s create a fair system that benefits both sides.”
Since 2007, the State of Alaska has provided around $8 billion dollars in tax credit subsidies to the oil industry and, if the current system is left unchanged, at the end of FY 2018 the state will owe over $1 billion in earned subsidies that have not been paid due to ongoing budget constraints.
HB 111 was formally introduced earlier today and referred to the House Resources and Finance Committees.
For more information, please contact Alaska House Majority Coalition Press Secretary Mike Mason at (907) 444-0889.