Alaska lawmakers approved a tax increase on the oil industry on Friday during a special session called to replace a tax system that critics said was tainted by a corruption scandal. Major oil producers have vigorously opposed the move to rewrite the state oil tax law, claiming the bill will slow investment and speed up Alaska's steep decline in crude production.
But the energy industry has gotten little sympathy from proponents of the rewrite, which was set in motion amid revelations executives from Alaska's biggest oil services company had used bribes to try to influence the tax law that passed a year ago.
"Any student of Alaska history knows that it has taken extraordinary circumstances, actual crises in the state of Alaska, for us to muster the political will to make adjustments," Senator Johnny Ellis, an Anchorage Democrat, said in support of the bill.
The bill boosts the base tax rates on oil companies' Alaska profits to 25 percent from the current rate of 22.5 percent, and adds an escalator of 0.4 percentage points for every $1 that net oil prices rise about $30 a barrel to capture benefits of high prices.
The bill also significantly tightens allowable credits and deductions and sets a standard deduction for operating expenses at the two largest fields, Prudhoe Bay and Kuparuk. Governor Sarah Palin, a Republican who supports the bill, has 20 days to sign it into law.
"This is the time where the state takes back its sovereignty," Rep. Les Gara, an Anchorage Democrat and longtime industry critic, said during final floor debate on Friday in the state capitol in Juneau. Opponents said it will damage Alaska's oil industry and, by extension, the state's oil-dependent economy.
"We took too much," said Rep. Jay Ramras, a Fairbanks Republican. "We allowed something that was an investment incentive bill 14 months ago to morph into nothing more than a massive, massive taxation bill." Oil industry executives expressed disappointment with the approval of the bill.
"I can only hope that once the impact of this legislation is clear, the administration and the legislature will revisit the issue," Doug Suttles, president of BP Exploration Alaska Inc, said in a statement.
Last year's tax overhaul was passed by at the urging of then-Gov. Frank Murkowski and intended to be frozen for decades and rolled into a decades-long natural-gas pipeline contract with the three major North Slope oil producers - BP, ConocoPhillips and Exxon Mobil.
The legislature never endorsed Murkowski's deal with the oil producers, which critics considered a giveaway to the oil giants, and Murkowski was soundly defeated in his bid for re-election.
A wide-ranging and still-unfolding federal corruption probe later revealed that executives from VECO Corp, then the state's largest oil-services company, bribed lawmakers for oil-friendly votes on the tax bill and related issues. The VECO executives have pleaded guilty to various corruption charges. Three former state lawmakers have been convicted of various charges in trials so far.