Daily Sitka Sentinel

Legislature Approves Oil Tax Compromise

By Sentinel Staff and
The Associated Press
    Alaska legislators voted Saturday to cut oil and gas drilling subsidies from the state budget.
    The compromise proposal was approved late Saturday in an 18-0 vote in the Senate and a 33-6 vote in the House. The move will save the state nearly $200 million per year within three years, officials have said.
    Gov. Bill Walker said in a statement that the approval is a “meaningful step to shore up our financial situation.” But he acknowledged that “the work is not yet finished.” He is expected to sign the measure into law.
    The state has a deficit of over $2 billion per year while its Constitutional Budget Reserve will have only $2 billion left at the end of the current fiscal year. Lawmakers have been looking at cutting spending, raising taxes and drawing from the Alaska Permanent Fund to solve the issue.
    The compromise approved on Saturday creates a system of tax write-offs for drilling companies. Companies will be able to write off drilling expenses on their future production taxes, and companies that don’t produce oil from sites where they drilled will not be eligible for the write-off.
    The Alaska Oil and Gas Association condemned the bill, claiming that it would discourage oil and gas drilling operations in the future.
    A fiscal analysis of the bill by the Alaska Department of Revenue found that it won’t save the state any money in the current fiscal year. But for fiscal year 2019, it will save $95 million and even more the following year, $185 million.
    Sitka’s legislators said they were pleased to see the deal go through.
    “I think we’ve got a good compromise,” said Sen. Bert Stedman, a member of the conference committee. “The House and Senate felt it was a reasonable and workable bill.”
    “I thought it was refreshing to see both sides meet in the middle for a reasonable compromise,” Rep. Jonathan Kreiss-Tomkins agreed. “It should happen far more often.”
    Stedman said the change in policy was a long time coming.
    “It was a policy that needed to be changed regardless of our cash position, but the cash position of the state accelerated it,” he said. “I’m pleasantly surprised we came to an agreement.”
    But more work still needs to be done on the oil tax issue, he added.
    “We’re still facing $800 million to $1 billion in cashable credits that are payable,” Stedman said.
    The second special session adjourned Saturday night and Stedman said he is looking forward to another one as soon as possible to work on the capital budget.
    “If the capital budget is delayed into August or September, we will see projects the Department of Transportation is working on shut down,” he said. “We’re trying to work it out with the House to get the capital budget put together ASAP.”
    While the Senate is favoring starting as soon as possible, Kreiss-Tomkins said the Gov. Walker and the House don’t want another special session called until a compromise has been identified.