NEWS: Resources Committee Co-chairs will Lead Effort to Reform Unsustainable Oil Industry Subsidies

House Majority Coalition

Agreement on House Bill 111 will Help Break the Stalemate in Juneau

May 23, 2017

Juneau – On Monday, Speaker of the House Rep. Bryce Edgmon (D-Dillingham) appointed House members to negotiate a compromise on legislation to reform Alaska’s unsustainable oil tax credit system that passed both the House and Senate. House Resources Committee Co-chairs Rep. Geran Tarr (D-Anchorage) and Rep. Andy Josephson (D-Anchorage) will represent the House Majority on the conference committee. The House Minority will be represented by Rep. Dave Talerico (R-Healy). The State Senate is expected to appoint their members to the conference committee on Wednesday.

“The key to unlocking the stalemate in Juneau is to fix this obviously broken system. It took two years and the onset of a serious recession, but the Senate has finally come around to realizing that we simply cannot afford to keep paying North Slope oil and gas companies cash for tax credits,” said Rep. Tarr, who will serve as the House Chair of the House Bill 111 Conference Committee. “We have stated since the beginning that a fix must happen this year, that’s what the Alaska public is demanding and what the industry needs to make investments. I anticipate vigorous negotiations as we seek compromise between our bill, which protects the State of Alaska in the current low oil price environment, and the Senate version of the bill, which continues to subsidize the oil and gas industry with lost state tax revenue.”

The House version of HB 111 eliminates the sliding per barrel tax credit that results in oil companies paying well below the base 35 percent tax rate at all but the highest oil prices. To balance this change, the House bill lowers the base tax rate from 35 percent to 25 percent and adds an additional 15 percent tax that is triggered when oil hits approximately $100 dollars per barrel. The House version of the bill also hardens the minimum tax to prevent most tax credits from being used to reduce production tax payments below the four percent minimum tax floor. Additionally, the House version of HB 111 features increased transparency measures that will give lawmakers additional information to determine the effectiveness of the tax credit regime.

The Senate version of the bill removes the important ring-fencing provision in the House bill that would prevent companies from using losses from one field to reduce or even eliminate production tax payments on a profitable oil field. The Senate version of the bill also leaves in place a provision that allows the $5 per barrel credit for “new” oil to be used to push production tax payments below the minimum four percent floor. Additionally, the Senate version of HB 111 allows exploration tax credits to be used against corporate income tax payments for the first time in the state’s history.

“We worked diligently in the House to craft a reform bill that protects the State of Alaska from near unlimited liability to cover losses of oil companies during low oil prices and return some value to the state at high oil prices,” said Rep. Josephson. “The Senate’s version of House Bill 111 is mostly smoke and mirrors to disguise the fact that their bill offers essentially no improvement from the current system, which undermines our budget and threatens vital state services like public health, public education, and public safety.”

A major difference between the two versions of HB 111 is the total fiscal impact to the State of Alaska. The fiscal impact of the House version of the bill is an additional $15 million in Fiscal Year 2018, increasing up to an additional $505 million in FY 2027. The Senate version of the bill would not bring in any additional revenue in FY 2018 and only $145 million in new revenue by FY 2027.

“The goal of the Alaska House Majority Coalition since day one has been to pass a comprehensive and complete fiscal plan to protect the economy and respond to the ongoing recession. Oil tax credit subsidy reform is a key piece of our plan, and I remain confident a compromise can be reached,” said Speaker of the House Rep. Edgmon. “The bill crafted by the House continues to incentivize oil exploration and production at the same time it repairs an unsustainable tax credit system. Alaskans concerned about their children’s schools and the safety of their communities have demanded reform to a system that has been a terrible drain on our treasury.”

It’s anticipated the first meeting of the conference committee for HB 111 will be held after the Memorial Day holiday.

For more information, please contact Alaska House Majority Coalition Press Secretary Mike Mason at (907) 444-0889.


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