Oil and Gas News: Debate on oil tax credits slows progress in state House

Rashah McChesney, Associated Press


JUNEAU, Alaska (AP) — A looming fight over the state's oil and gas tax credits is coming to a head in the state House as it majority caucus struggles to pass a bill that would reform the current tax regime.

HB 247 is a scaled back alternative to a bill proposed by Gov. Bill Walker. Both are designed to gradually reduce tax credits paid to oil and gas companies but differ in how quickly they would reach that goal and how much the state could save. The 26-member House majority has yet to come to a consensus on the particulars of reform.

The caucus met Sunday and then cancelled a planned vote on the House floor. Lawmakers cancelled committee meetings Monday and again met to hammer out a deal. Those meetings did not generate consensus by the time another hearing on the House floor had been scheduled and it was pushed back until Tuesday. Members will meet again Monday to work on the bill.

House Speaker Mike Chenault, R-Nikiski, said his caucus is divided and not ready to vote. Some lawmakers have said they want to see fewer changes made to industry incentives and others don't think HB 247 goes far enough to reduce state credit payouts.

The current regime could see the state paying $775 million in credits to companies with no tax liabilities next year.

But members of the oil and gas industry have cautioned lawmakers against making changes when it is reeling from low oil prices. At least one of the major producers had an operating loss in 2015, according to the Department of Revenue. All three are forecast to have losses in 2016.

Some producers have been able to use operating loss credits to go below the minimum production tax. Revenues from that tax have fallen from $2.6 billion two years ago to a projected $54 million next year. HB 247 would disallow the use of operating loss credits to reduce payments "below the floor" of the minimum production tax.

But some, like Rep. Lance Pruitt, R-Anchorage, see proposals to harden the floor as a detriment to future investment.

Pruitt, a member of the majority caucus, was one of four members of the House Finance committee who recommended that the bill not be passed.

"We'd take the money now, there'd be less development," he said.

Meanwhile Senate Republicans said they are waiting for a decision on the bill from the House as both bodies consider options at reducing the state's $4 billion budget deficit.

Sen. Lesil McGuire, R-Anchorage, said she sympathized with the difficulty of getting a controversial bill through the 40-member House, but the delay is an indicator to her that the House is pushing back its timeline for proposing other revenue-generating measures as well.

As the session enters its last scheduled week, she said that leaves senators in the spot of waiting for House bills or pushing revenue ideas of their own.

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