JUNEAU, alaska — Oil long has been king in Alaska, but the state’s Republican governor is having trouble finding support for a tax break he believes is critical to ensuring it remains so.
With a stunning defeat in the state Legislature this week, Gov. Sean Parnell has failed twice since last year to reduce production taxes on oil companies, a strategy he believes is crucial to bringing in new companies and ensuring those already here invest more and boost North Slope production. That would ensure Alaska’s financial lifeline remains healthy.
Oil accounts for roughly 90 percent of unrestricted state revenue in resource-rich Alaska. It has helped make possible yearly dividend checks that Alaskans get just for living in the state. And recent flush years have created budget surpluses.
What’s unusual in Parnell’s defeats is that lawmakers from both parties, particularly this year, showed little stomach for his plans, albeit for differing reasons. Some saw the recent tax-cut plan as a corporate giveaway or unneeded by oil companies that consistently post huge profits; others say Parnell’s bill was ill-conceived or poorly explained.
The latest setback came Wednesday, when Parnell abruptly announced in a rare statewide televised news conference that he was removing his oil tax bill from consideration by lawmakers. The surprise move — unprecedented in Alaska — came just eight days into a special legislative session that he had sought to deal with the issue.
He blamed the bipartisan-controlled Senate, which he said appeared incapable of passing “comprehensive oil tax reform.”
After sometimes combative hearings, especially in the Senate, lawmakers in both chambers said the administration hadn’t made their case. To many, it remained unclear, for example, how many barrels of new oil the state would see produced under Parnell’s plan, or when Alaska might break even on any tax breaks it gives.
While the bill was aimed at boosting oil production over time, the near-term impact on the state’s economy also came into play. While Alaskans have enjoyed a healthy state budget in recent years, Parnell’s budget director said the state could find itself in a deficit as early as next fiscal year under his plan. A legislative consultant said Parnell’s approach would wind up giving oil companies “quite a lot” of money for projects that are profitable to do today.
