Daily News-Miner - Alaska Gov. Parnell: State Needs More Competitive Oil Tax

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By Becky Bohrer

Alaska's oil tax structure should be changed to include more tax credits and the elimination of surcharges that oil companies say discourage greater investment when oil prices are high, Gov. Sean Parnell said Friday.

Parnell had indicated for weeks that he planned to propose changes to the oil and gas production tax system, which was championed by Sarah Palin when she was governor. But he had refused to say whether he considered the Alaska's Clear and Equitable Share broken or how far he was willing to see it revamped.

Parnell told The Associated Press Friday that companies have complained there's no incentive to invest in the state when oil prices are high because the tax structure eats into profits. He said his own research lends credence to that.

Oil remains king in Alaska, providing much of the state's revenues. But forecasts call for a continued decline in production, and political leaders have been looking for ways to get more oil flowing through the trans-Alaska pipeline.

Currently, the surcharge - assessed on top of a 25 percent base tax rate - kicks in when a company's net profits surpass $30 a barrel. In July 2008, when oil hit $140 a barrel, the production tax brought in $900 million for the month, according to the state Department of Revenue. When prices later fell below $30 a barrel, it brought in $50 million.

The North Slope crude price settled at $83.26 a barrel on Friday.

Parnell is seeking election to the job he inherited when Palin resigned last year. He said his goal is to fill the pipeline, which carries a fraction of the oil volume it once did.

Parnell's opponent, Democrat Ethan Berkowitz, has been talking for months about a need to replace the system Palin ushered through in 2007. Berkowitz favors a field-by-field system that he says both recognizes the costs and challenges of developing individual leases and is aimed at creating fiscal certainty for companies.

He accused Parnell of having an "election day conversion" on the need to change the system.

"I think what Sean looked at was not declining (oil) production on the North Slope but declining poll numbers," he said.

During the last legislative session, Parnell proposed what his administration considered tweaks to the system, including tax breaks, securing mixed results.

Parnell announced his proposal Friday in Anchorage before the pro-development Resource Development Council.

In return for the changes, which include tax credits aimed at spurring heavy oil development, Parnell asked that company officials publicly testify before the Legislature to help make a "compelling case" for jobs and development.

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