On Tuesday the State Senate passed SB 305, a bill that overhauls the state’s oil tax system from the current severance tax to a petroleum profits tax, PPT. 

    The bill we voted on contained the following elements.

-     22.5% tax rate on the producer’s profits.

-         25% tax credit rate, for investments and expenses.

-     A sliding scale component that increases the tax above $50 a barrel.

    Since SB 305’s introduction by the Governor several weeks ago, the bill has undergone changes in both the Senate Resource and Finance committees.  Most observers concluded that the bill was substantially weakened in the Finance Committee.  Within that committee there were two basic changes; the tax rate went down and the credit rate went up.  For these and other reasons, I could not support the bill.

    I’d like to note that with all the taxation changes amended into the current bill, SB 305 as passed by the Senate gets less for our resource than the Governor's original bill.  Moreover, the bill requires a price of $50 in order for the state to get its one-third share. Former Governor Jay Hammond long promoted a tax sysetem that would share the natural resource wealth of the state in equal thirds; one each for the state, the Federal government and the oil industry.

    I have been concerned about many things in PPT and low oil prices is one of them.

A Brief History of Alaska Oil Prices

April 27, 2006                        $70.13

   Average cost in:

April 2005                                $50.63

April 2004                                $35.43

April 2003                                $25.59

April 2002                                $24.99

April 2001                                $25.55

April 2000                                $23.83

April 1999                                $15.64

April 1998                                $12.41

April 1997                                $18.54

April 1996                                $20.40

Source, AK Department of Natural Resources

    If you would like to learn more about PPT, please visit the Alaska Democratic Legislator’s website:

http://www.akdemocrats.org

    There, you can click on the PPT link to view documents from the administration, producers, consultants, independents and more.