JUNEAU, Alaska — In Juneau, Governor Sean Parnell is reasserting his controversial claim that big cuts in the State's Oil Production Tax will bring big investments to the North Slope.
The governor spoke in an interview with Channel 2 News on Tuesday.
During that interview, Parnell reiterated a claim that some state lawmakers are disputing. He said that his proposed tax cuts for oil companies -- amounting to $18 billion dollars over 10 years -- would generate $5 billion in new investments. In addition, Parnell claimed, those new investments would help re-fill the Trans Alaska Pipeline -- which now sends a little over 600-thousand barrels of oil a day to the port of Valdez. In its heyday, the line provided 2 million barrels a day.
Parnell has been vowing to re-fill the line to at least a million barrels a day -- half its rated capacity -- within a decade.
The problem is, a number of state lawmakers disagree with Parnell's plan to boost production. Some characterize his tax proposal as a "giveaway". One lawmaker -- State Senator Hollis French (D) Anchorage -- has actually sent a letter to the governor asking him to "desist" from claims that his tax plans will lure $5 billion in new oil investments in the state.
On Tuesday, State Senator Bill Wielechowski (D) Anchorage echoed French's concerns. Wielechowski said that under existing state lease agreements, oil companies were required to pump oil in fields as soon as those fields become economically viable. Wielachowski says that offering $1.8 billion a year in tax cuts is not a wise way for the state to deal with the oil companies.
The Alaska Senate is considering a much more modest proposal for tax reform. It modifies marginal tax rates at higher oil prices, and provides about $250 million dollars a year in tax cuts. That's about 14% of what the governor's plan offers oil companies in tax breaks.
However, for his part, Parnell says the senate plan offers no new agreements for increased investments. That's why he believes that his proposal -- embodied in a measure called House Bill 110 -- is superior to the senate plan, known as Senate Bill 192.
But State Representative Les Gara (D) Anchorage says the governor's characterization of his tax-cut plan is misleading. Gara agrees with State Senator Weilechowski that oil investments would take place in the state anyway -- even without a tax incentive of $1.8 billion a year.
The dispute is not likely to be resolved any time soon. The state legislature is scheduled to remain in session through mid-April. And if they can't agree on oil tax reform, there is the possibility of an extended session. So the argument over oil tax reform is far from over. And at this point, it's not clear how it will be resolved.