{"id":3385,"date":"2014-04-12T13:00:44","date_gmt":"2014-04-12T21:00:44","guid":{"rendered":"http:\/\/bertstedman.com\/new\/?p=3385"},"modified":"2014-04-12T13:00:44","modified_gmt":"2014-04-12T21:00:44","slug":"senator-stedman-presents-oil-tax-bill-in-senate-resources","status":"publish","type":"post","link":"http:\/\/bertstedman.com\/new\/?p=3385","title":{"rendered":"Senator Stedman Presents Oil Tax Bill in Senate Resources"},"content":{"rendered":"

Earlier this week, I had the privilege of presenting my oil tax bill to the Senate Resources Committee.\u00a0 Senate Bill 192 <\/a>proposes to amend deficiencies in Alaska\u2019s petroleum production tax, establishing a more reasonable, balanced and sustainable production tax for Alaskans.\u00a0 The current tax structure, created by the passage of Senate Bill 21 last year, sets a base tax rate of 35% based on a net profit system which is calculated after deducting the cost of royalties, transportation, operating and capital expenses.\u00a0 The producers also receive a tax credit between $1 and $8 paid for each barrel of oil produced.\u00a0 This credit is simply a means of reducing the producers\u2019 base tax rate and is not contingent on any performance measures.\u00a0 The producers are not required to do anything to receive this credit except pump oil from their existing wells. There is no requirement for expansion, exploration, increased production or capital investment in Alaska.\u00a0 The state is obligated to pay this credit to the producers on a sliding scale which increases as the price of oil decreases.\u00a0 For example, if the price of oil is between $140 – $150, the producers receive a tax credit of $1 per barrel.\u00a0 But if the price of oil falls to under $80, the producers receive a tax credit of $8 per barrel.\u00a0 In FY15, the impact to the state treasury as a result of this per barrel tax credit is estimated to be almost one billion dollars.\u00a0 Senate Bill 192 would reduce that per barrel credit by half returning almost half a billion dollars to the state treasury in FY15.<\/p>\n

In my presentation, (which can be viewed here<\/a>) I started by describing the history of Alaska\u2019s various petroleum tax regimes.\u00a0 Following that, I talked about the structure of Alaska\u2019s current tax system.\u00a0 The gross value of the oil produced on the North Slope is $19.1 billion in FY15.\u00a0 After deducting royalties, transportation, operating and capital costs, the net production tax value is $7.7 billion.\u00a0 That\u2019s the amount on which the state applies the 35% base tax rate.\u00a0 At this point in the calculation, the production tax equals $2.6 billion but before that tax is paid, the per barrel credit is applied which brings the producer\u2019s tax liability down to $1.7 billion.\u00a0 That equals an effective tax rate of 21.9%, well below the 35% base tax rate.<\/p>\n

I firmly believe the compensation for the value of Alaska\u2019s hydrocarbons is too low compared to similar world class hydrocarbon basins around the world.\u00a0\u00a0 I demonstrated this while presenting my bill by comparing Alaska\u2019s tax structure with North Dakota\u2019s tax and royalty system.\u00a0 During the Senate Bill 21 debate last year, supporters argued that we need to be competitive with North Dakota in order to attract investment.\u00a0 Under the ACES tax structure in FY13, Alaska\u2019s tax was $762 million over what it would be in North Dakota, prompting supporters of Senate Bill 21 to argue that we were not competitive.\u00a0 Now under Senate Bill 21 in FY15, Alaska\u2019s tax will be $1.5 billion under what it would be in North Dakota. That\u2019s a huge transfer of cash to the producers that isn\u2019t necessary in order to be competitive.<\/p>\n

Senate Bill 192 would also raise the minimum production tax from 4% of the gross value at the point of production to 15%.\u00a0 As the price of oil goes down and the credits go up, we need a higher minimum tax to protect the state\u2019s share of its resource wealth from our legacy fields on the North Slope.\u00a0 At current oil prices, the change in the minimum tax would not have any revenue impacts to the producers or the state.<\/p>\n

Senate Bill 192 did not move from the Senate Resources Committee and will likely remain in that committee until the end of this legislative session.\u00a0 Although I had no expectation that the committee chair would allow the bill to move from committee, I do appreciate the opportunity to present the bill.<\/p>\n","protected":false},"excerpt":{"rendered":"

Earlier this week, I had the privilege of presenting my oil tax bill to the Senate Resources Committee.\u00a0 Senate Bill 192 proposes to amend deficiencies in Alaska\u2019s petroleum production tax, establishing a more reasonable, balanced and sustainable production tax for Alaskans.\u00a0 The current tax structure, created by the passage of Senate Bill 21 last year, […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3385","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=\/wp\/v2\/posts\/3385","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3385"}],"version-history":[{"count":5,"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=\/wp\/v2\/posts\/3385\/revisions"}],"predecessor-version":[{"id":3391,"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=\/wp\/v2\/posts\/3385\/revisions\/3391"}],"wp:attachment":[{"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3385"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/bertstedman.com\/new\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}