As summer has entered full swing, I wanted to update you on what’s happening down in Juneau, what we have accomplished, and what still needs to be done.
HB 111 Ending Cashable Oil and Gas Tax Credits
Reforming the oil and gas tax structure has been a priority for me during my time running for office and now as a senator. In talking to folks around District J, I know it is a priority for many of you too. I am so pleased that the legislature has taken the first step in creating oil and gas taxes that work for Alaska and the industry.
In my view, the most important aspect of HB 111 is ending Alaska’s cash for tax credit system. These credits will be replaced with lower-production tax payments that will incentivize production, getting more oil into our pipeline while protecting the state from losses associated with failed projects.
HB 111 also includes a form of “ring-fencing” which means companies can’t use tax credits from failed development and apply them to tax liabilities from successful production sites. Instead, losses can only be written off outside of a field once production occurs. Taken together, the compromise encourages development in a low-price regime while ensuring the state doesn’t foot the bill for failed projects.
This bill does not accomplish everything, but shows an understanding by both legislative bodies that we must be smart and prepare for the economic reality of lower oil prices and increased supply as a result of unconventional development in the Lower 48 and beyond. This is the first step to a comprehensive package that will protect our future.
House and Senate leadership are now beginning negotiations on a much-needed capital budget. The Governor has said he is prepared to call us back into another special session once there is a bill ready for us. I am confident that we will pass a complete capital budget before July 31. Building on the goodwill between the House and the Senate, I also expect that we will address revenue in the fall.
We are making progress, but we still have a way to go. We have taken the first steps to ensure the oil and gas industry contribute their fair share to the state, but that will not go far enough. For too long we have relied exclusively as a state on oil and gas royalties. This is one of the reasons for our economic insecurity, our recession, and our bonds being downgraded. From the beginning I have advocated for a progressive broad-based tax to provide certainty to all Alaskans. From teachers to small business owners and investors, to the oil and gas industry, diversified revenue sources and the certainty they will provide is the most important thing we, as a legislature, can provide to our citizens and future Alaskans. I will keep fighting to make sure we get there. Thank you to all of you who have written and called my office with support, ideas, and suggestions for how we can do better. Keep them coming, your engagement matters!