March 31, 2011
Thursday

(SitNews) - Governor Sean Parnell announced yesterday a new goal for Alaska of one million barrels of oil production per day through the Trans Alaska Pipeline System (TAPS) within ten years.  Current production is about 600,000 barrels per day, down from two million barrels 20 years ago.

“By reaching this goal we will have sparked tens of thousands of new jobs and billions of dollars in payroll,” Governor Parnell said.  “By taking action, we will experience longer term state savings and sustainable budgets and contribute more to our nation’s energy security and domestic stability.”

In a call to action at a rally Thursday attended by nearly 1,000 Alaskans and hosted by the Alaska Chamber of Commerce, Governor Parnell said that his administration’s proposal to reduce oil taxes to spur investment and create jobs was vital to arresting the oil production decline and achieving the new throughput goal.

With 18 days left in the legislative session, House Bill 110 is moving to the House floor for a vote as the Senate Resources Committee takes public testimony on Senate Bill 49.

Governor Parnell, “The time to reduce oil taxes is now and I am asking all Alaskans to send a clear message to legislators in Juneau that a ‘do-nothing’ strategy is unacceptable because Alaska’s future is at stake.”

In response Rep. Les Gara and Rep. David Guttenberg say according to a new fiscal note from the Alaska Department of Revenue, Governor Parnell’s proposal to give large tax breaks to the oil industry would still cost the state billions of dollars in lost revenue even if future oil production increases. Because producers have not committed to increasing investment, exploration or production should the bill pass, the administration used arbitrary scenarios assuming various degrees of increased production. No scenario showed Alaska making back lost revenues once the bill takes full effect.

“This bill fails if it works,” said Rep. David Guttenberg (D-Fairbanks). “And if it doesn’t work, and we’ve not heard any reason to believe it will, then it’ll cost billions more.”

The governor’s bill gives the tax breaks without requiring any increased investment, exploration or production. Even in the unlikely event companies re-invest the tax breaks in Alaska and production increases, the numbers show that by 2017 Alaska will still be losing up to $1.4 billion a year.

In an effort to make sure Alaskans get something in return for reducing oil revenues, Democrats offered amendments in the House Finance Committee to only give tax credits for exploration or building production facilities. The amendments failed on caucus lines.

“Giving close to $2 billion a year to oil companies, when they won’t commit to spend the tax breaks in Alaska or increase production, is a fool’s game,” said Rep. Les Gara (D-Anchorage). “That’s why we propose a better idea – to help companies only if they spend money in Alaska for new exploration, and the processing facilities needed to put new oil in the pipeline.”

The new fiscal note says that with a five percent increase in production, Alaska would lose over $1 billion in revenue each year starting in 2015, increasing to more than $1.3 billion in 2017, the last year the report estimates. Even with a highly optimistic twenty percent production increase, Alaska would still lose $828 million in 2017 alone.  Factoring in additional royalties from the new production lowers the amount of lost revenue slightly, but the governor’s proposal still costs the state hundreds of millions a year in best-case scenarios and over a billion dollars a year even with a five percent increase in production.

On the Web:

Updated fiscal note with the projections
http://www.legis.state.ak.us/basis/get_documents.asp?session=27&docid=4302

Source of News:

Office of the Governor
www.gov.state.ak.us

House Democratic Caucus
http://www.akdemocrats.org  

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