Senate Bill 114 would mean a 76% tax increase on oil production in Alaska, according to the State Department of Revenue.
In bill sponsor Sen. Bill Wielechowski’s world, this is what is known as a “tweak.”
Kara Moriarty, speaking on behalf of the Alaska Oil and Gas Association, reminded the committee that oil and gas industry contributes more to the economy than any other industry in the state, according to McKinley Research Group, which concluded that the oil and gas industry accounts for 24% of the jobs in the state. For every one job that is a direct oil and gas job, there are 15 that are created indirectly through indirect payments or tax payments.
“Increasing taxes result in a higher net cost to oil and gas companies,” Moriarty said, and this means companies have less to invest. Less to invest will lead to impacts in Cook Inlet and the North Slope.
She also reminded the senators that SB 21, which passed in 2013 and was ratified by voters even after Democrats were able to get a repeal initiative on the ballot, has helped stabilize production, and that actual oil production in Alaska has beat forecasts for the past 10 years.
Critics note that SB 114 has not been subjected to current economic modeling, and its authors are ignoring how much the world has changed in the past 10 year, including how difficult and costly it is to get projects financed and approved. SB 114 is one more disincentive to companies who may want to invest in Alaska.
The bill has also not been analyzed fully by tax experts and is being rushed through the Senate. SB 114 is a hugely complicated bill that runs 42 pages long with sections such as:
Notwithstanding AS 43.55.020, a person subject to tax under AS 43.55.011(e), (f), 25 and (o); 43.55.020(a), (e), (g), (h), (j), and (l); 43.55.024(c), (e), (i), and (j); 43.55.030(e) and 26 (f); 43.55.040; 43.55.075(b); 43.55.160(a), (e), (f), (g), and (h); 43.55.165(a), (b), (e), (g), (h), 27 (l), (m), (n), (o), and (r); 43.55.170(a) and (b); 43.55.180(a); 43.55.890; and 43.55.895(b), as 28 amended by secs. 2 - 4, 6 - 15, 17 - 25, and 27 - 41 of this Act, and 43.55.011(q); 29 43.55.024(k); and 43.55.160(i), added by secs. 5, 16, and 26 of this Act, shall pay the balance 30 of the tax due before January 1, 2024, by January 1, 2024. Until January 1, 2024, the 31 Department of Revenue shall waive interest that would otherwise accrue under AS 43.05.225 01 and civil and criminal penalties accruing under AS 43.05.220, 43.05.245, and 43.05.290 that 02 are a result of the retroactivity of this Act.
It’s nearly certain that most legislators will not able to read it or comprehend the unintended consequences of SB 114 fully, as this year’s Legislature is represented by many new lawmakers — three new senators and 17 new representatives, for a total of one third of the entire Legislature being freshmen.
The entire bill is at this link.
Testimony continues later this week in Senate Finance, including at 1:30 pm on Thursday, and 9 am on Friday.
Pass it and we”ll have our own Bud Lite screw up.
Are we business friendly or not?
???
You expect radical leftist statists to listen to and consider FACTS?
Hello, facts and reason and reality mean NOTHING to those people!
Just declare the oil companies pay a “honorarium” of $1billion a year.
Extortion is easier for everyone than this attempt at legal banditry.
This idiocy of constantly trying to extort more and more from the thing that is the SOLE driver of Alaska’s economy proves it doesn’t matter how long anybody has been in the state legislature. They are all useful idiots and they prove it every year. Incompetence combined with avarice and self absorbed opinion give you the crap that happens in Juneau.
Robert,
Can I add Pride to your short list of Juneau crap ingredients?
These people truly believe money just grows on trees and that the private sector has groves of said trees. Since we know delusion and illogical thinking is the operating system of the left, are we surprised?
Alaska gets less for its oil than any other major jurisdiction.
1. Our royalty rate is about 12 percent. Texas, North Dakota, and most private land owners get at least double that.
2. Our severance tax collapsed after SB21. We are paying out more in corporate welfare “credits” than we gain in severance tax revenue. Before SB21 we earned about $3.8 billion per year in tax revenue. After SB-21 that fell to less then zero, after “credits”.
3. Because SB-21 is such a giveaway, we have spent about $20 billion of our savings, and most Alaska families have lost tens of thousands to lower dividends. Our dividends were lowered from the statutory formula to subsidize SB-21.
Alaskans are getting ripped off. SB21 is totally unconstitutional. Our Constitution requires that we get “maximum benefit” from the sale of our finite, natural resources.
Dunleavy now wants an income tax so Alaskans can continue to subsidize the theft of our oil.
By the way, over $13 billion dollars of oil is taken from Alaska per year- and we are getting no tax revenue- after credits.
SB114 ends the worst of the welfare provisions of SB-21. Unless you like lower dividends, and you like sales and income taxes, you better support SB114.
Then seek an increase commiserate with those states. Slowly. Not a 76% rise in one sitting.
Dunleavy wants a sale tax because he doesn’t want the legislature to be mean to him anymore. In his far too long stint as governor he has capitulated more times than France.
The goal of all kinds of new taxes have nothing to do with “theft of oil” and everything to do with a runaway wannabe socialist legislature.
MA.
I have no idea where Suzanne came up with a 76% tax increase. SB114 revises (reduces, but does not eliminate) the “credits” AKA- corporate welfare- that has cost Alaska $7.2 billion over the last 10 years. SB114 also changes the sub chapter S loophole that Hilcorp enjoys, to treat all the producers the same, which is fair.
Ove $13 billion dollars worth of oil (which equates to $18,571 per Alaskan) is taken from us per year and we’ve been getting a nearly negative severance tax after the credits are paid. This bill attempts to reduce this costly welfare.
By the way, the $7.2 billion in credits we’ve paid over the last ten years is roughly the amount of money Alaskans have lost to smaller dividend checks.
Alaskans have been subsidizing this madness with their dividends.
None of that addresses the issue of (if necessary) going for a steady increase instead of shock treatment.
Nor addresses the legislature and Dunleavy (useless blob) desire for unnecessary taxes to feed an out of control government.
Correction. Dunleavy wants a sales tax (not an income tax) to subsidize the theft of our oil. Some legislators want an income tax.
He also wants a sales tax to pay PFDs. How idiotic is taxing people to pay them a PFD. There should be no broad based taxes while there is still a PFD payout.
Dunleavy is an idiot, so his asinine proposal is right on character for him.
Thank you M. Your post contains more facts than the original article. The spot price for WTI today is $72. Last year, the combined 5 largest oil companies made over $100 Billion profit. An amazing accomplishment considering that in most parts of the world their profit averages $2 per barrel. In Alaska, their profit can be more than 20X that, according to information previously published on MRAK. Alaskan’s foolishly believe that the state is taxing the oil companies oil, when in fact, the state is actually selling the companies our oil, dirt cheap, or free, according to the information you posted. Combine that with the Supreme Court allowing the legislature to steal the PFD, and we are left fighting over the scraps. It is a fight that the people cannot win against the political donor class, which includes the oil companies. Remember “You will own nothing and be happy?” We’re on our way.
Oil companies already know Alaska is a bad investment. We have more oil than anywhere but more challenges (government and environment) than anywhere.
In a volatile industry, add in the uncertainty of access to the oil fields, the uncertainty of being allowed to pump said oil, AND a state legislature which has proven time and again its not a honest partner, it makes zero sense to continue to do business here.
We have negative GDP, population growth, and are losing professionals to the Lower 48. Oil will still be pumped no matter how high the tax. What else can go wrong?
Hasn’t the State of Alaska LEARNED yet, what happens when we raise the taxes. The oil companies disappear, and no longer will stay. They have extraordinary expenses in bringing the oil for us to produce. We had several big oil companies(BP for one) leave when the ‘ACES’ “SB21” project went thru last time..
Our state finds a way to outspend every other state per capita and uses every excuse to justify it. When the oil companies are taxed out of production they will come for your wallet. Not just your PFD. All businesses are in decline in Alaska, and non-working residents and government employees are the new growth industry. The service industry has already been destroyed.
Trig, are you able to read the financials for corporations like ConocoPhillips? They are doing very well. They are not being taxed out of existence. Its just the opposite. They pay almost no taxes here. After “credits” are applied they might pay a 4 percent production tax. Before this was adjusted several years ago, after credits were paid, they had a rate that was effectively negative.
Even better, they pay half the royalty here than they would in Texas, or N. Dakota, or even on private land.
Gosh M add this to your “List”….Thankfully we have a PFD approaching 100 Billion due to the “theft of our oil” 🙂
Andy, the corpus of the Permanent Fund is nowhere near $100 million. Our fund is only at $76 billion- $24 billion short of $100 million.
Norway, by comparison, is not run by corrupt fools. Norway has now grown its sovereign wealth fund to a staggering $1.3 TRILLION. Norway does not give its oil away, and it started its fund 20 years after we started the Alaska Permanent Fund.
But Andy, if you want to give up your dividend- and all Alaskans dividends- to pay the corporate welfare to Big Oil… well, why would you?
Norway also has a massive tax burden on its people. It needs the sovereign wealth to sustain its bloated welfare government.
It also needs its welfare state to support citizens who are taxed the majority of what they make.
The statement of Norway not being run by corrupt fools is a matter open to intense debate.
If the state of Alaska was running a business , the model has failed miserably . The north slope was producing nearly 2.4 million barrels per day in the early eighties . Today barely 20% of that amount in 2023 . There are currently known reserves of 500,000 barrels of production per day of oil flow in the ground ( proven , drilled and tested ) . TAPS was built on $2 per barrel oil . $75 per barrel it sits in the ground . Something is rotten in this scenario .
I have never been able to figure out Alask’s oil tax system. I get so many different explanations all so different. Is it structured this way just to keep us confused? Why not just sell the oil for a set percentage of the going price and be done with it.
My either . Worked on TAPS for thirty years . I’ve watched the production dwindle away . I just assumed that when TAPS was built in mid seventies that it was very profitable at $2 per barrel oil . At $75 per barrel oil , no incentive to produce . Two things , either the producers are warehousing the oil or no capital for producing new discovery’s . I think it’s the later . When L88 Energy finds a 1.5 billion barrels of producible oil 20 miles west of haulroad and not big news or in production today . You have to wonder what is going on . Why is the state of Alaska not building a year around road to that development? Instead , forcing them to build these worthless and very expensive ice roads that come and go with the seasons . Why is there not a gravel access road out to Pt. Thomson ? Ridiculous in my mind . The east side of Slope has several oil discoveries and no roads for development or oil spill cleanup . The entire Trans Alaska Pipeline is totally accessed with hundreds of miles of access roads for maintenance and oil spill clean up .
The state has received billions of dollars in oil royalties and won’t make the simple investment in permanent access roads ? One of biggest hurdles for both producing the oil and attracting smaller companies . It’s been very small company’s that found most all the production on North Slope starting with Atlantic Refining and Richfield Oil in late sixties initial discovery .
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