SITKA, ALASKA
Hamilton stressed that his message was educational. Although he was returning to Juneau after his Sitka visit, he said he had no plans to lobby the senate for passage of Governor Parnell’s oil tax cuts outlined in House Bill 110. He suggested that the senate would come around later this year on its own.
“So I’ll tell you exactly what’s going to happen. The senate is going to vote this down. At this stage of the game it’s face, if nothing else. They’re going to get the additional reports they asked for in June and September, and then you’ll have something that looks a lot like the Obama White House meeting where they’ll gather in the leadership and talk about this. They’ll either call a special session in late fall, or they’ll say, Okay we got it fixed, we have a deal. And they’ll pass it in the next legislative session off the bat. That’s what’s going to happen.”
The main thrust of the Make Alaska Competitive Coalition’s argument is that the state’s tax structure has created the incentive for oil producers to explore elsewhere. Hamilton said that, at current prices of roughly $120 per barrel, a company’s profits were $18 for Alaskan oil, $45 for oil produced in Alberta, and $57 for oil from Louisiana. Referring to the controversy over the proposed cuts to Alaska’s tax rate, Hamilton asked, “Why isn’t this a slam dunk?” He then answered his own question.
“We are making a fortune off this new tax regime. An absolute fortune. We’ve repaid $5.5 billion into the constitutional budget reserve, there’s another $7 billion assigned to general funds, we had a $3.4 billion surplus last year, and that didn’t enjoy the highest spikes in the oil that we’re seeing right now.”
The “new tax regime” Hamilton mentions is called ACES, or Alaska’s Clear and Equitable Share, which was passed during the Palin administration. ACES increased the tax rate as oil prices – and profits — rose. Hamilton thought ACES went too far.
“We had the most popular governor in the history of the United States who, God bless her, had exposed grotesque corruption in the oil service industry. I think there was an atmosphere there that allowed us to pass a vengeful tax.”
But the current bipartisan majority in the Alaska senate does not necessarily share that opinion. Sitka Senator Bert Stedman opposed the steep increases of ACES, but was instrumental in developing the progressive tax structure of its immediate predecessor, the Petroleum Production Tax, or the PPT. In a press conference in Juneau on Tuesday (4-13-11), Stedman reminded reporters that the 20-percent base tax first proposed for the PPT was not very attractive.
“What we found when we ran those analytical models is that our percent of profit oil declined as prices went up, and we thought that was a raw deal for the state of Alaska. So we in the legislature insisted that we put in this mechanism called progressivity.”
It’s the progressivity of ACES that Hamilton and the Make Alaska Competitive Coalition now think is the problem. With prices on the rise, Hamilton and MAC believe oil production in the state should be increasing, instead of the other way around.
Hamilton made no attempt to argue that the oil companies were in business for anything other than profit, or that Alaska was not dependent on oil for the lion’s share of state revenue. He said, “We’re all in the oil business.”
The Alaska Legislature is scheduled to adjourn this Sunday.
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