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Contact Information:
Toll Free:(800) 665-2689
In the Homer Area:(907) 235-2921
Via Mail or in Person: 345 W. Sterling Hwy., Suite 102B
Homer, Alaska 99603
Fax:(907) 235-4008
Website:
Email:
Greetings from Homer after the final close of the 2nd special session of 2006. This is the 3rd special session of this 24th legislature, a record number of sessions as well as a record length.
Oil and Gas Tax
On the last night of the special session the House concurred with the Senate changes to after initially failing to pass the revised bill on a 20 – 19 vote (we need the majority of the 40 House members to vote for a bill for it to pass). The absent ill member flew into town for the vote and several other legislators changed their minds as well so it passed 26 – 14.
The bill, as we sent it to the Senate, contained several formulas negotiated to get enough support from those that wanted a higher tax rate and those who wanted a lower tax rate. One formula allowed the actual tax rate to be modified down from the 25% rate, by the amount of per-barrel investment, to a 'floor' of 20%, if capital investment doubled from the current average for the North Slope. The other formula was to prevent "gold plating", a term used to denote investment made simply to make money through tax reduction. The Senate heard testimony about the complications of the formulas and was shown by oil industry analysts that a reduction in the amount that oil companies can deduct or utilize for tax credit would solve both problems in a much simpler way.
There was also concern that the BP deferred maintenance causing the Prudhoe Bay shut down could be deducted and possibly even qualify for a tax credit. The worldwide field average for normal maintenance and overhead is about 30 cents per barrel. The Senate inserted a provision disallowing the first 30 cents per barrel from deduction against the PPT and disallowing this 30 cents per barrel from any claimed tax credit, solving the potential problem of a company claiming a deduction on all of their deferred maintenance. The result is that each year about $90 to $100 million will be automatically recovered by the state, above the net tax rate. This provision moves the bill closer to a tax on gross revenue.
The tax rate in the bill is set at 22.5% of net profit with an escalator for high prices of 2.5% per ten dollars when the price of oil goes above $40 per barrel net. In the months prior to finally passing this legislation we worked on a number of variations of this tax with rates between 21.5 to 23.5%, with progressive features from .1% to .25% per dollar above either $35 or $40 net (equivalent to about $50 to $55 gross). There has been much discussion about the benefit of taxing on the gross versus taxing on the net. The net tax that we passed is a specific 'net' with a long list of disallowed expenses. We audit these companies' production taxes and state income taxes and have access to their federal income taxes so 'gaming the system' has been severely restricted. In the end I believe we arrived at a good tax revision with simple and clear calculations. At $60 per barrel it raises about $2.5 billion compared to the 2 billion of the governor’s proposal and the 1.2 billion of the current tax structure. At prices above $155 west coast, the progressive feature would raise an additional 25% over the base 22.5% base tax rate giving the state an almost equal share via this windfall profit feature. Everyone should realize this production tax is in addition to the 12.5% royalty, 9.4% corporate income tax and the 20 mill property tax revenues.
The Department of Revenue has put together a set of charts detailing the revenues to the state under the recently passed tax bill in comparison to the status quo and other versions of the PPT bill. To view these charts click on the following link to my web-site: then click on the link "New Oil Tax Revenues Comparison Chart".
Gas Pipeline
The sweeping bill presented by the Governor as "Alaska Stranded Gas Act Amendments" was stripped down to a simple extension of time for the Commission of Revenue to have 120 days instead of the current law allowing 30 days to review public comments, propose amendments based on those public comments, and issue final fiscal interest findings. Neither the House nor Senate was in any mood to give the Governor permission to tie oil taxes into the gas line contract or the myriad of other authorities he sought. In the end we could not get the 30 votes needed to advance even the time extension bill to final reading in the same day to bring the issue to a vote. The minority wanted to amend the time extension to prevent this Governor from issuing the 'findings' by amending the bill to not allow the review to be completed in less than 180 days nor more than 240 days. However, this would have also killed the bill as the Senate was down its calendar past "communication from the other body" and could not get the 2/3 vote to change the rules and go back up the calendar on this final day. Many procedural rules prevent things from moving too fast in the legislative process unless there is a broad consensus.
Seward Office Hours
My staffer, Ms. Katie Shows is in Seward today and tomorrow. She will be holding office hours today at the Legislative Information Office from 3-7 p.m. If you can't make it today but would like to meet tomorrow, you can schedule an appointment by calling 399-1075. Katie will also be in Moose Pass tomorrow evening.
Following Bills
All bills can be accessed through the state’s Bill Action and Status Inquiry System (BASIS). You can see what committee a bill is in, when it will be heard, how committee members voted, and much more. You can view all bills relating to your specific areas of interest by selecting "Subject Summary" from the menu on the right. Access BASIS through the link below, or by doing a search for "BASIS Alaska".
http://www.legis.state.ak.us/basis/start.asp
Live on the Web
Most committee hearings can be seen and heard on Gavel-to-Gavel, which is broadcast on both local access TV and on the Internet. You can also access online archives from their website. .
Contact Us
If you would like to speak to me regarding a specific issue, it is helpful to first get in touch with the member of my staff handling related issues. You can click on their email addresses to send them a note, or just give us a call at the office. Please provide your full name, address and phone number on any correspondence with the office. Your time and effort are much appreciated.
Louie Flora
State Affairs, Resources, Fisheries, HB 328
(907) 465-4963
Katie Shows
Health Education and Social Services, PERS/TRS, Budget, HCR 5, HCR 28, HB 238
(907) 465-2028
Rep. Paul Seaton
House District 35
(800) 665-2689
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