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News Miner - Parnell Calls for Action on Gas, Oil Concepts

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Location: Fairbanks, AK


Gov. Sean Parnell said Tuesday that Fairbanksans need to rally behind plans for oil tax reform and a gas trucking plan to spur the Legislature to act.

Parnell, speaking at a Greater Fairbanks Chamber of Commerce luncheon, told the packed room at the Carlson Center that this session will determine the fate of both issues.

Parnell focused the bulk of his comments on his overhauled plan for taxing North Slope oil production. After two years of failing to get a tax reform plan through the Legislature, his administration revamped its approach to include a simplified system for both development tax credits and the state's progressive tax rate when oil prices are high.

"It's completely different with what we've been working with the past two years," he said. "We've learned a lot."

Parnell said there are problems on both ends of the current system. The state paid out $1 billion in tax credits last year, with few assurances that it was leading to more production. When oil prices are at their current levels, he said oil companies profit from Alaska petroleum is at nearly half the average in Lower 48 fields.

"We simply are not competitive," Parnell said.

Parnell is proposing to eliminate tax credits for North Slope development and set a flat state oil tax rate of 25 percent. For newly discovered oil, the state would only tax 80 percent of the oil produced.

Parnell acknowledges that he expects the state to lose about $500 million a year in oil revenues during at least the next three years, compared to the existing tax structure. He said the state can offset those losses with savings until increased production makes up for those losses.

"We can manage our way through to new production," he said. "If we wait and do nothing, we will be out of cash and out of options."

Parnell said he's willing to back a proposal other than his own, but said it needs to meet four criteria: a fair system for both Alaskans and oil companies; one that encourages production; simplicity; and a regime that makes the state competitive with other oil-producing areas.
On the issue of North Slope natural gas, Parnell said, it's up to Interior residents to make themselves heard.

Lowering energy prices is the Chamber's top legislative priority this session, and Parnell said guidance from its members and other Fairbanksans is necessary to push the process along.

Alaska Industrial Development and Export Authority has received 16 proposals to deliver gas from the North Slope, with a series of public meetings planned in the weeks ahead to describe those options. Parnell said legislation needs to be forwarded to give AIDEA the option to move forward with a preferred plan.

Parnell said he has several requirements for a North Slope gas plan. It has to bring the lowest cost gas to Fairbanks, providing a springboard for delivering gas to other parts of the state. It also needs to serve as a catalyst for private-sector involvement, since he's not interested in the state funding a plan on its own.

To successfully make it through the Legislature, a solution needs to provide energy solutions for the entire state, Parnell said.

"I'm going to ask you not to be Fairbanks-centric. … I'd like you to support this not for Interior Alaskans, but all Alaskans," he said.

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