Alaska Senate advances oil tax bill, but leaves out some of the pieces proposed by the House

JUNEAU — The Republican-led Alaska Senate moved ahead Monday with a House bill to eliminate a cash subsidy program for oil companies, but it rejected another House idea to raise oil taxes at prices below $100 a barrel.

The Senate Resources Committee released its revision to House Bill 111 at a Monday afternoon meeting and advanced it 40 minutes later to the Senate Finance Committee, where it's scheduled for hearings later in the week.

The move squared with statements in recent weeks from Senate leaders, who said they were willing to consider changes to the subsidy program but skeptical of adjustments to the broader tax framework. That framework was established four years ago in legislation authored by their chamber, Senate Bill 21, and it's now under pressure as state lawmakers eye the oil industry as a potential source of cash amid a budget deficit of nearly $3 billion.

The largely Democratic House majority earlier this month passed its own version of HB 111, which is projected to add about $200 million to the state's bottom line by 2020. But the Senate has different ideas, and the resulting debate is one of several ideological fights over deficit-reduction measures that are keeping lawmakers in Juneau for a second week beyond their 90-day deadline.

[New Alaska House oil tax bill emerges but faces an uphill climb in Senate]

The new proposal from the Senate accepts the House's plan to eliminate cash subsidies for North Slope oil companies — a program that's cost the state hundreds of millions of dollars a year, though recent payments have been vetoed by Gov. Bill Walker.

The Senate's proposal cuts the subsidies even more than the House's bill, because it would also eliminate the program for so-called "Middle Earth" — south of the North Slope and north of Southcentral Alaska, where it's being used by Alaska Native corporations.

But the Senate Resources Committee, chaired by Anchorage Republican Sen. Cathy Giessel, rejected other provisions in the House's legislation that would have had the effect of increasing state revenue when oil prices are between $60 and $100 a barrel.

The House was proposing to accomplish that by lowering the base oil tax rate in tandem with repealing a key tax credit granted for each barrel of oil production. But the new substitute legislation from Giessel's office left those sections entirely out — dropping the length of the bill to 18 pages from the 39 in the House proposal.

"We have a consensus on this one issue," Anchorage Republican Sen. Kevin Meyer said at Monday's hearing, referring to the cash subsidies. But the House, he added, "went into some areas that rewrite the whole tax policy."

"And I don't think that's an area that we want to go to," added Meyer, who works for oil company ConocoPhillips outside the legislative session. Senate Republicans have argued that the state's tax policy should be geared toward stimulating more oil production, rather than extracting more money from companies.

Another concession in the Senate's version of the bill would stop oil companies from paying less than a 4 percent minimum tax by using a specific tax credit tied to losses. The Senate accomplished that change by repealing the credit and replacing it with a deduction that's factored in earlier in the process of calculating taxes.

A separate provision would allow companies to use tax credits against prior years' taxes, interest and penalties if they're assessed retroactively, like after an audit.

The Senate Resources Committee hasn't released an estimate of the financial impact of its proposal. But one House Democrat, Anchorage Rep. Geran Tarr, said she thought the Senate's legislation doesn't ask enough of oil companies to justify the Legislature's approval of other deficit-reduction measures favored by the House that would hit individual Alaskans, like an income tax or reduced Permanent Fund dividends.

"There are just so many features of this that are so generous," Tarr said. "We'll have a lot more work to do to get to a compromise."