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Rep. Gara Says Provision in SB21 Reduces Taxes to State

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An Alaska State Representative recently spoke about a little known provision in Senate Bill 21.  According to him, it will cause the state to earn much less revenue from oil taxes.  KDLG’s Chase Cavanaugh has more. 

Alaska Democratic Representative Les Gara spoke out Wednesday against a provision in Senate Bill 21, which introduced a new oil tax regime.  He says it allows oil companies to claim a Gross Value Reduction tax credit on certain oil fields, reducing the effective amount they pay under SB21.  Gara says it was briefly discussed in a report by Dr. Scott Goldsmith.  Professor Emeritus of Economics at the University of Alaska Anchorage.  

“The oil companies and their allies inserted a provision in SB 21 that is hidden in the Scott Goldsmith report the oil companies like to talk about, but they hide the provisions that don’t help them, that says we will get a zero value or negative value out of any oil fields from 2003 11 years ago and all new oil fields into the future.”

According to Goldsmith’s report, companies would be allowed to claim the benefits of this provision on oil fields approved after January 2003, as well as any in the future.  It goes on to say that the effective oil tax rate would be around 23%, but for companies that claimed the gross value reduction, that rate would be closer to 13%.  According to Gara, the low tax rate, combined with declining production and other credits, doesn’t allow the state to recoup the costs it pays in tax rebates to develop the oil fields.  

“Point Thompson, Exxon broke the law for 30 years. We sued them to force them to finally produce that field. They get a reward for breaking the law. They’re going to pay the zero or negative value tax rate because they delayed and broke the law for 30 years. Ooogaruk and Nikaitchuq, which went into production under ACES, will get that zero percent or negative production tax value. They were already in production under ACES. At least five fields that were moving forward under ACES, and there are no fields under SB 21 that weren’t moving forward under ACES, that’s also amiss, but CD-5, the southwest corner of Kuparuk, expansion in Kuparuk, Beartooth, Moose’s Tooth, the stuff in NPR-A, all of those fields are moving forward under ACES, but since it takes 5-10 years from first investment to production, they’ll be treated as new fields and they’ll get to pay a zero or negative rate to the State of Alaska.”

Gara says if Alaskans knew about this provision, and that the state would receive little to no value from fields put into production after 2003, they never would have approved it.  He also stressed that the zero to negative value in taxes would only cause more problems for the state’s budget. 

SB 21 is the subject of a ballot measure that , if approved, would repeal the law.  That will be voted on during the state primary election on August 19th.