Alaska oil tax policy: ships passing in the night?

• Author: Keithley, Bradford G.
• Position: OIL & GAS

[ILLUSTRATION OMITTED]

Any opinions expressed her in are the author's own.

Alaska's approach to oil and gas taxes has taken a number of twists and turns over the last several years. The latest twist may largely be the result of ships passing in the night.

Background

Shortly following her election in 2006, Gov. Sarah Palin proposed a set of changes to the then-existing tax structure. She termed the package "Alaska's Clear and Equitable Share," or "ACES." ACES changed a previous package of modifications which had been enacted in 2006.

Although he supported ACES at the time it was passed, late in his campaign for his own term in 2010 Gov. Parnell began generally to talk about what he then termed as the need for "tweaks" in ACES. Following his election, Parnell proposed a set of changes, which was introduced in the Alaska House of Representatives and subsequently referred to as "HB 110."

After some modifications, the House passed the governor's proposal in March 2011 by a vote of 22-16. The bill then went to the Senate.

The Senate held hearings in various committees on the governor's proposal for the remainder of the 2011 legislative session and again most of the 2012 legislative session.

Ultimately, during the very final days of the 2012 legislative session, the Senate passed its response to the governor's proposal as an amendment to HB 276, a bill that started out for a different purpose. The Senate's response took a different approach to the governor's original proposal and focused mostly on so-called "new fields," areas outside the existing so-called "legacy" fields such as Prudhoe, Kuparuk, Alpine, Milne Point and Endicott.

The Senate bill provided for potentially significant reductions in taxes assessed on oil produced from the "new fields"--so-called "new oil"--and made limited modifications to the tax structure governing the legacy fields.

Citing the lack of time remaining in the regular session to consider the Senate's changes, the House did not take up the Senate's rewrite of the governor's proposal, but while in committee the House leadership expressed concern with the bill's limited focus.

Immediately following the end of the 2012 regular session, Parnell called a special session to deal with three issues, one of which was oil tax reform. Echoing the House leadership's concerns about the limited scope of the Senate's proposal, the Governor started the special session by offering a new bill, SB 3001 (HB 3001 in the House).

Seeking to...