SPECIAL BONUS EDITION!!!
What it’s all about

It’s brutal

We’re in Day 3 of the administration’s tax presentation to the powerful House Special Committee on Oil & Gas, of which I am a powerful member, on its proposed changes to our oil production tax. I already feel like I’ve been rode hard and put away wet. Who would have thought that sitting on your fundament listening to people talk could be so tiring? I mean, it’s not like I’m digging ditches or anything. But I do have to listen hard to understand what’s being said, because we’ve managed to complicate our tax system so much that a normal person has a real hard time understanding it. Yeah, I know. There are people who would object to me categorizing myself as normal. But you get the point.

It’s risky

There’s a lot of talk about risk, mostly by committee members. The risk they’re talking about is the risk that we’ll tax too much, oil industry investment will dry up and the economy will tank. Could we tax too much? Sure. Are we anywhere near that? No. In fact, there’s nothing proposed that any consultant we’ve heard from thinks will affect oil industry investment in Alaska.

It’s not that simple, of course. Because we had a gross tax for many years, we didn’t need information about oil industry decision making. We just added up the number of barrels shipped and multiplied it by the tax rate. We abandoned that because the multiplier was 0 in too many cases. But as a result we don’t have historical data on what the industry was up to all those years. Lack of information means more risk.

But so what? We’re down here to make decisions, and the risk of failure is the price of making decisions.

I’m pretty sure that a higher production tax won’t wipe out investment and tank the economy. After all, Conoco – the only company that reports Alaska profits – said it made $2.3 billion on its Alaska operations last year. But if it does, hey, we’re the legislature. We can just change the tax again.

It’s about stability

Wait! you say. Won’t that destroy our reputation for stability? Well, the fact of the matter is that “stability” is just a code word. The oil companies don’t care about stability. They’d accept a change every 15 minutes as long as the change meant lower taxes. They don’t want stability, they want low taxes. So the only changes they object to are ones that raise the tax.

It’s confusing

I’m not just talking about the subject matter here. I’m talking about the attitude of some of my colleagues. They talk like they’re down here to be impartial judges, weighing what the administration says against what the industry says and rendering a dispassionate judgment.

That’s not why I’m here. I didn’t run for judge. I ran to represent the people of House District 25. What’s in their best interest is for the state to extract the maximum value for its resources, so the legislature can use the money to provide schools, roads, cops – you name it.

Do I want to kill the goose that lays the golden eggs? No. I just want it to lay bigger eggs. And let me be clear: I don’t want more money just to run up the budget. I want to save a big chunk of what we get. Because everybody thinks oil production will keep going down no matter what we do. So we’ll need the money. Last session I put in a bill to put the entire budget surplus in the Constitutional Budget Reserve. It went nowhere. Next session, I plan on introducing a bill to put it into the Alaska Permanent Fund.

It’s a foregone conclusion

At the end of yesterday’s hearing, Rep. Kurt Olson confirmed what I’ve been suspecting for weeks: A substantial number of House Republicans don’t want to change the production tax. What Olson said was he thinks the committee should pass a bill that allows the administration to pay auditors more, and that’s it. (There are other so-called information decisions to be made, too, and it wasn’t clear to me if they’d be in the bill or not.) So expect a committee substitute that does not includes the governor’s production tax changes. (Of course, nothing is certain. So eat dessert first.) Are there the votes for that bill? I don’t know. But Olson strikes me as a careful politician. It’s likely he wouldn’t have said that unless he thought he had the votes to do that on the committee.

More later,