A Citizen’s Guide

JUNEAU — It took less than five minutes for the gloves to come off once lawmakers returned to the capitol Thursday to review the state’s year-old petroleum profits tax.

Lawmakers were recalled to a special session by Gov. Sarah Palin, who deemed the tax a failure and tainted by the federal corruption probe.

The tax was intended to increase state coffers even as production from the North Slope declines about 6 percent a year. But three former lawmakers in the Legislature when the oil tax passed in 2006 have been convicted or indicted on federal bribery charges related to its deliberations.

PPT also hasn’t performed as advertised, Palin said, with the shortfall estimated at $800 million. She wants the tax on oil companies’ profits raised from 22.5 percent to 25 percent.

Differences among lawmakers quickly got aired in the Legislative Budget and Audit Committee hearing held before lawmakers ceremoniously were to gavel in late Thursday.

The hearing featured feedback from two industry consultants used during last year’s oil tax debate.

But before either saw a microphone, state Sen. Johnny Ellis, D-Anchorage, questioned the credibility of one, former Gov. Frank Murkowski consultant Pedro Van Meurs.

Ellis said Van Meurs’ public statements differed from his private messages when he worked for the Murkowski administration last year.

He cited a Van Meurs’ letter to Murkowski’s former chief of staff, Jim Clark, raising concerns over gas line negotiations with North Slope producers BP PLC, Exxon Mobil Corp. and ConocoPhillips. Publicly, he endorsed Murkowski’s tax plan.

The message in the letter, made public early this year, differed from what Van Meurs was endorsing on behalf of the Murkowski administration, Ellis said.

“He was giving good advice to the previous executive in private, and he was saying something very different in public,” Ellis said.

When that happens, “I’m done with that consultant,” he said.

Undaunted, Van Meurs minced no words with lawmakers: Leave the PPT tax rate alone or risk scaring off future investment.

“Quite frankly, you become a basket case of instability,” he warned lawmakers. “From an international perspective, it would be creating a very negative image if you are being perceived as making fundamental changes to such an important fiscal package every year.”

Daniel Johnston, who was a consultant last year for the Legislature, was less prescriptive on what the state should do, but said the federal corruption investigation changes things.

“If it weren’t for the cloud (of corruption), I would heartily agree with Pedro,” Johnston said. “It’s the cloud that makes such a difference.”

And lawmakers should take a stand if corruption was involved. “If that’s the case, you probably would have a strong justification for making a change just to let the whole world know that you don’t put up with that sort of thing. That would send a heck of a message,” he said.

Thursday’s committee will not take formal action on Palin’s bill called Alaska’s Clear and Equitable Share, or ACES.

Instead, up to three committees each in the House and Senate will begin reviewing the bill. The Senate Resources Committee and the House Oil & Gas Committee get first crack Friday.

“We have to go into this with an open mind,” said Sen. Charlie Huggins, a Wasilla Republican who will sit on all three Senate committees hearing the bill. “But this cannot be anything knee jerk. This is a comprehensive look at the state’s tax structure and we have to get it right.”

Disagreement over changing the tax, exhibited before any official committee hearing, underscores how difficult it could be to bring any meaningful changes to the state’s petroleum profits tax in a monthlong special session.

“In 30 days it is going to be tough to educate all the 13 new members and reach out to all the different factions,” said Majority Leader Ralph Samuels, R-Anchorage.

Even more difficult will be trying to muster enough votes to pass it.

“It’s going to be tough to get 21 and 11 votes (in the House and Senate respectively); hey, it took us eight months to get there last time,” he said.