Action Alert: Testify to Oppose CSHB 247

Overview:

After nearly two dozen hearings, the House Resources Committee finished its work on HB 247, the Governor's oil and gas tax bill. The committee introduced a committee substitute for the bill, considered 45 amendments and passed the bill out of committee on March 22nd. While the CS is an improvement over the Governor’s bill, it still represents a tax increase on industry, increasing the cost of doing business in Alaska. CSHB 247 is now before the House Finance Committee, which will take public testimony at your local Legislative Information Office on Saturday, April 2nd at 2:00 p.m.

Requested Action:
Please present brief testimony on Saturday on CSHB 247. Urge the House Finance Committee to avoid changing oil tax policy yet again, especially when our largest economic driver is cash flow negative due to low oil prices. An industry that looks to invest billions of dollars at a time needs stability and predictability. We have a responsibility to let policy makers know that changing the tax policy for the sixth time in 11 years will impact investment decisions and lead to fewer jobs, less production, less revenue to the Permanent Fund, and lower state revenues.

In addition, please go to http://openforbusiness.aoga.org/ to send a pre-written email to your legislators urging them to “do no harm” to our oil and gas industries when they are struggling with unprecedented low oil prices.

If you’re not able to testify in person, please send an email to members of the House Finance Committee and your legislator to let your voice be heard:

http://www.akleg.gov/basis/Committee/Details/29?code=HFIN

The Alaska Oil and Gas Association prepared a comprehensive position paper on Governor Walker’s original proposed oil and gas tax policy and its potential impacts on the industry and Alaska. Please review as it will be useful in preparing testimony and comments.

For a list of Legislative Information Offices, visit: http://akleg.gov/lios.php

RDC's Invited Testimony on HB 247 (March 2nd)

Points to consider for your testimony:

• After many years of debate and a failed referendum in 2014, Alaska should not be looking to change its taxes yet again.  This sends the wrong message to investors in all industries. 

• Thanks to a competitive tax structure, industry is re-investing in Alaska, even at low oil prices when capital is hard to come by. Raising taxes and eliminating credits could stop investment and derail projects. Alaska needs that investment now more than ever to keep oil and gas production up to protect Alaskan jobs and businesses as well as the revenue that production generates for the state.

• Higher industry taxes in this low-priced commodity environment could be a game changer for Alaska, leading to lower state revenues and a weaker private sector over the long term.  The private sector is the foundation of Alaska’s economy and its underlying health is the key to sustaining jobs, state government and the overall economy.

• The number one goal of the House Finance Committee should be to protect the jobs and investment necessary to maximize TAPS throughput. However, committee substitute HB 247 will increase taxes on an industry already operating at a loss, resulting in lower investment, fewer jobs, lower production and less state revenues over the long term.

• It is not good policy to raise taxes on businesses that are already losing money. Raising taxes will make a bad situation worse.

• Although not in the committee substitute, raising the minimum tax by 25 percent, as proposed by the Governor and some legislators, will cause significant impacts on North Slope oil producers at today’s low oil prices. While the state is facing a massive budget deficit in part due to low oil prices, the industry is also in a negative cash flow situation.

• According to the Revenue Sources Book, the average cost to produce a barrel of oil on the North Slope is approximately $52 per barrel. Companies have to incur that cost before any taxes are paid. Raising taxes on companies in this environment is a serious miscalculation and is bad for industry and bad for Alaska. Any short-term gains in state revenues will be overshadowed by the long-term impact to investment, jeopardizing Alaskan jobs and new production.

• The current oil tax system is balanced, setting a higher minimum floor than the previous tax system, while setting a stable and predictable rate when oil prices rise again. At current prices, Alaska’s oil tax policy has brought hundreds of millions of dollars more in tax revenue to the state than it would have under the previous system.

• Alaska cannot control the price of oil, but it can control what kind of business climate we create here: one that encourages continued investment and more oil for TAPS.

• Tax reform of recent years improved Alaska’s competitive position for investment and partially insulated the state from massive industry cuts that are occurring elsewhere. The governor’s tax proposal moves us in the opposite direction, jeopardizing future investment, jobs and production.

• To sustain its economy, Alaska needs to encourage new investment, jobs and production by maintaining a stable, competitive tax structure.  Conversely, the more Alaska taxes companies to produce a commodity, the less it will produce here, and the more it will invest in production elsewhere.

• Higher taxes will discourage investment and shrink the pie for everyone.  When you tax something, you get less of it; in this case, oil.

• Oil companies can operate anywhere in the world, and we want them to invest in Alaska, hire Alaskans, spend billions of dollars in our economy, and to add more oil to TAPS.

• Tax credits have attracted significant investments from companies new to Alaska. Without credits, Southcentral Alaska might still face the prospect of importing its energy at high costs to heat homes and generate electricity. Thanks to tax credits, local utilities have security of supply for several years. In the long term, additional investment will be needed to meet demand.