Senator Berta Gardner

February 11, 2013

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Serving Midtown, Spenard, and UMed

State Capitol Bldg. Rm 417
Juneau, AK 99801
Call Me: 1-800-331-4930

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Companies Produce, We’ll Reduce

Dear Friends and Neighbors,

Senator Gardner speaks about the importance of disclosures for oil tax credits.
Senator Gardner speaks about the importance of disclosures for oil tax credits.

We are in the thick of things regarding the oil tax discussion. I sit on the first committee that reviewed the Governor’s oil tax bill and I would like to deliver a message: the Governor’s oil tax bill is still a giveaway to some of the wealthiest corporations in the world, doing nothing to put more oil in the pipeline, and pushing the state over the fiscal cliff.

I believe, as does the Governor, that we can come up with a tax system that is fair, easy to understand, and encourages new production. What the Governor and I do not agree on is how to achieve these goals.

A fair tax system is one that balances the interests of industry, government, and the public. The Governor’s tax bill proposes a reduction of almost $1 billion a year in oil tax revenue by eliminating progressivity and creating an ultra-low tax rate of 17% for new oil. Reducing taxes is a tool that we can use to encourage investment, but I can’t support its use without some sort of guarantee that these reductions will result in new production. Giving away billions to industry with no new production isn’t fair to the people of Alaska.

In great company today, I helped roll out the Democratic Alternative to the Governor’s oil tax bill. Our bill meets all of the Governor’s stated goals and, most importantly, it gets oil back in the pipeline. SB 50, which you can review here, specifically targets new development and fields with incentives. New development, or any new barrel of oil produced above what a unit produced last year, would be taxed at a lower rate than the rest of the field. We also put in incentives for new oil in older fields by giving a gross revenue exclusion to oil produced from previously untapped geologic formations.

Oil Production Decline chart

Senator French talked about the “real-time” experiment in which Alaska had a nearly zero percent tax rate for legacy fields. This chart shows that decline continued even in spite of this massive tax cut. A $1 billion a year tax giveaway is not the way to spur production.

I’m a cosponsor of SB 50 because I believe in the principles ensconced in the policy of that bill. We’ve heard arguments from industry and the administration that government take at the high end of prices is too steep. Instead of eliminating progressivity, like the Governor’s bill, we’ve capped progressivity at 55%.

Video Thumbnail
Click here to hear my explanation of progressivity

In the spirit of trying to target new and challenged oil, we inserted a tax credit into SB 50 that would allow the Alaska Industrial Development and Export Authority (AIDEA) to disburse low-interest loans to new oil producers trying to build processing facilities. A heavy oil boom may be in store for Alaska as well, and with that in mind, we’ve added a gross revenue exclusion on 10% of all heavy oil produced.

Every year, the legislature goes through the process of deliberating oil taxes. This year is no different and we are bombarded with information. Both bills, ours and the Governor’s, can seem complicated but the important thing to remember is that it’s our oil. My constitutional obligation is to you, the constituent, to get the maximum benefit for our resources. I’m willing to help address impediments to new oil, but I can’t give away $20 billion of the state’s revenue without some guarantees: companies produce, we’ll reduce.

I’m Berta and I’m still listening,

If you have any questions, please feel free to contact my office

signed: Berta

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