Alaska legislators began hearings Monday on a proposal by Governor Sean Parnell that would reduce the state's oil and gas production tax.
Deliberations on the bill are expected to be protracted and last for most of the legislature's scheduled 90-day session.
"We find were stymied by the federal government" in the development new oil in places such as the offshore, "so we need to focus on what we can control here, which is development of new oil on state-owned lands," State Revenue Commissioner Bryan Butcher told the Resources Committee in opening remarks.
Parnell's bill focuses on changing formulas in the tax rate that result in very high rates of tax, which will encourage new exploration, and expanding tax credits for in-fill drilling and other development in existing fields, Butcher said.
The governor's proposed changes would reduce taxes on the industry by about $1 billion/year, according to an analysis by the Revenue Department. Such taxes and royalty revenue account for about 90% of Alaska's $5 billion general fund budget.
Parnell and the producing companies say the change is needed to encourage investment to stem declining oil production from North Slope fields. Legislators who oppose the change say theres no guarantee that giving industry a big tax break will result in substantial new investment.
The Resources Committee in the state House of Representatives will hold three hearings this week to listen to Department of Revenue and consultants to the legislature explain the problems with the current tax system.
