A Citizen’s Guide

Local lawmakers are sifting through Gov. Sarah Palin’s new oil tax bill this week and making it clear they won’t be using any rubber stamps.

“It’s kind of an all-encompassing piece of legislation,” Rep. Scott Kawasaki, a Democrat from Fairbanks, said. “We’ve got dog ears on all these different pages.”

Kawasaki said Tuesday he still favored an oil production tax based on gross oil production, rather than one based on net company profits like the current tax. Palin will have to convince him that her hybrid plan, which is largely based on net profits but incorporates elements of a gross tax, is better than a gross tax, he said.

“You can put a flashy name like ACES on it, but that doesn’t mean it’s going to go anywhere,” he told the governor. Palin’s plan is dubbed Alaska’s Clear and Equitable Share, or ACES.

Other local lawmakers echoed the idea.

“The first thing we have to do is ask her how she came to that conclusion,” said Rep. John Coghill, a Republican from North Pole, referring to the conclusion that a gross tax simply wouldn’t work.

Coghill said he’d also like a better explanation of how the Department of Revenue concluded the current petroleum profits tax will fall far short of expectations in the coming year.

Another big question is where to set the overall tax rate. Palin’s proposal raises the base tax rate from 22.5 percent to 25 percent and does away with certain tax deductions.

The concern with that, Coghill said, is that it may not be the best number for securing revenues on a long-term basis, which will require continued exploration and development on the North Slope.

“If it dries up the pipeline, then what have we done?” he said. Coghill said he didn’t mind a higher tax rate as long as it was coupled with incentives.

The two local members of the House and Senate Finance Committees hesitated to judge the new proposal.

Rep. Mike Kelly, a Republican from Fairbanks, said he wanted more time to look at the bill. There are things in it that take significant research to understand, he said.

Sen. Joe Thomas, a Fairbanks Democrat, said staying with a net tax might help allay concerns that Alaska had an unstable investment climate, even if a gross tax would be simpler to implement.

“That might be a reasonable idea, as long as we can get to where we’re trying to,” he said, meaning a fair share of revenue for the sale of the resource.

Rep. David Guttenberg, a Democrat from Fairbanks, said he was happy so far with the Palin administration’s willingness to share information and make its consultants available to lawmakers.

He added that he still wanted to study the bill himself, citing Ronald Reagan’s advice of “Trust but verify.”

“I’m still going to have to be convinced,” he said.

Contact staff writer Stefan Milkowski at 459-7577.