{"id":24595,"date":"2017-07-16T08:58:00","date_gmt":"2017-07-16T15:58:00","guid":{"rendered":"http:\/\/spijue.wpengine.com\/news\/at-deadline-alaska-legislature-cuts-oil-subsidies-to-help-budget\/"},"modified":"2017-07-16T08:58:00","modified_gmt":"2017-07-16T15:58:00","slug":"at-deadline-alaska-legislature-cuts-oil-subsidies-to-help-budget","status":"publish","type":"post","link":"https:\/\/www.juneauempire.com\/news\/at-deadline-alaska-legislature-cuts-oil-subsidies-to-help-budget\/","title":{"rendered":"At deadline, Alaska Legislature cuts oil subsidies to help budget"},"content":{"rendered":"

After weeks of on-again<\/a>, off-again<\/a> negotiations, the Alaska Legislature has cut the state subsidy of oil and gas drilling. A compromise proposal approved Saturday night will save almost $200 million per year within three years.<\/p>\n

The last votes on House Bill 111 came with less than an hour remaining in a special session that was set to expire at midnight. The Alaska Senate voted 18-0 and the House voted 33-6 to approve a deal finished about an hour before the final roll call.<\/p>\n

Gov. Bill Walker is expected to sign the bill. In a statement released at midnight, he said the bill is \u201ca meaningful step to shore up our financial situation\u201d but warned that \u201cthe work is not yet finished.\u201d<\/p>\n

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I commend #akleg<\/a> for passing HB 111. Once a deal is reached on the capital budget, I will immediately call them back into session. -BW pic.twitter.com\/hJbPZDrnrx<\/a><\/p>\n

\u2014 Governor Bill Walker (@AkGovBillWalker) July 16, 2017<\/a><\/p><\/blockquote>\n

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Alaska\u2019s deficit remains more than $2 billion per year, and the state\u2019s Constitutional Budget Reserve will have only $2 billion remaining at the end of the current fiscal year. Lawmakers face tough choices in cutting spending, raising taxes, or spending from the Alaska Permanent Fund.<\/p>\n

Saturday\u2019s action was one step toward fulfillment of a deficit-fighting plan envisioned by the Alaska House\u2019s coalition majority<\/a> earlier this year.<\/p>\n

To solve the deficit by 2020, the House Majority has been calling for cuts to drilling subsidies, a broad-based tax (such as an income tax), a sustainable draw from the Permanent Fund, and modest budget cuts.<\/p>\n

House Bill 111, as passed Saturday night, would replace the state\u2019s existing subsidy program with a new one.<\/p>\n

Under existing law, if oil and gas drillers lose money on the North Slope, they can deduct a portion of their losses from future tax bills. Small companies that don\u2019t have oil production (because they\u2019re still exploring and drilling) can instead receive what are known as \u201ccashable credits.\u201d<\/p>\n

These credits can be sold to other companies, used when there is production, or sold to the state (when the Legislature appropriates money to buy them).<\/p>\n

Lawmakers agreed that system was no longer affordable, but they disagreed on a replacement.<\/p>\n

The compromise proposal creates a system of tax writeoffs. Companies can write off their drilling expenses on future production taxes. Those writeoffs are linked to the places where drilling took place. If a company doesn\u2019t ever produce oil from that place, it never benefits from the writeoff.<\/p>\n

Furthermore, the writeoff will eventually lose value: 10 percent per year after seven years (if the prospect is producing oil) or 10 years (if the prospect is dry).<\/p>\n

According to a fiscal analysis of the bill by the Alaska Department of Revenue<\/a>, the state will save nothing in the current fiscal year. In FY19, the state will save $95 million; the following year, the savings rise to $185 million.<\/p>\n

Between the current fiscal year and fiscal year 2027, the bill will save the state government more than $1.5 billion.<\/p>\n

While that might be good news for fiscal hawks, not everyone is pleased.<\/p>\n

After passage of the bill, the Alaska Oil and Gas Association published a withering statement damning the proposal and claiming that it will deter future oil and gas drilling here.<\/p>\n

Sen. Cathy Giessel, R-Anchorage and one of the bill\u2019s drafters, warned that \u201cthis bill, make no mistake about it, is a tax increase.\u201d<\/p>\n

She nevertheless voted for it.<\/p>\n

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The #AKLeg<\/a> today ended cash payments to oil and gas companies. Read more here: https:\/\/t.co\/F4GdLRjDmA<\/a><\/p>\n

\u2014 AlaskaSenateMajority (@AKSenMajority) July 16, 2017<\/a><\/p><\/blockquote>\n

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On the opposite side, Rep. Sam Kito III, D-Juneau, voted against the final compromise because he felt it didn\u2019t go far enough.<\/p>\n

Furthermore, he said, while the bill calls for the creation of a Legislative working group on oil and gas taxes, he\u2019s not sure the group will do what\u2019s needed.<\/p>\n

\u201cWe probably need to spend more time on dealing with the oil and gas issue. I am concerned that the working group might not be enough to keep the incentive going to make that happen,\u201d he said.<\/p>\n

Despite Kito\u2019s opposition (and that of several House Republicans), most lawmakers saw it as something that left almost everyone equally unhappy.<\/p>\n

\u201cIf you didn\u2019t get everything you wanted in this bill, that\u2019s not an exclusive club,\u201d said Rep. Geran Tarr, D-Anchorage and the chief House negotiator on the bill.<\/p>\n

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HB 111 has passed. Hot damn! Was not everything I want but a huge thank you to everyone who helped. So much good work in this bill! #akleg<\/a><\/p>\n

\u2014 Rep. Geran Tarr (@RepGeranTarr) July 16, 2017<\/a><\/p><\/blockquote>\n

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After the vote on the oil issue, lawmakers adjourned the special session and prepared to leave Juneau with one substantial item left undone: the state\u2019s capital construction budget.<\/p>\n

Already, the Alaska Department of Transportation has postponed several road repair and improvement projects for lack of funding, and the delays are likely to increase because of Legislative delay.<\/p>\n

The Senate voted 17-1 to ask the House to convene for a third special session on Sunday or Monday, but there appeared to be no appetite to do so among members of the House. Forty votes are needed for the Legislature to call itself into special session, which means the support of the House Majority is required.<\/p>\n

House Majority Leader Chris Tuck, D-Anchorage, said there was no point in starting a special session until there was agreement on a budget between the House and Senate.<\/p>\n

As with House Bill 111, the House and Senate have passed different versions of a capital budget that must be compromised.<\/p>\n

If lawmakers were to start a special session without an agreement, Tuck said, that session would resemble the one just ended: Lawmakers would sit in Juneau, collecting per diem pay, until they agreed on a solution.<\/p>\n

If lawmakers wait until they have an agreement, they could hold a one-day special session and save money, he suggested.<\/p>\n

For his part, Gov. Walker said in his statement that he expects that agreement to come about before July 31.<\/p>\n

\u201cOnce a deal is reached, I will immediately call them back into session,\u201d he said.<\/p>\n

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Contact reporter James Brooks at james.k.brooks@juneauempire.com or call 523-2258.<\/b><\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

After weeks of on-again, off-again negotiations, the Alaska Legislature has cut the state subsidy of oil and gas drilling. A compromise proposal approved Saturday night will save almost $200 million per year within three years. The last votes on House Bill 111 came with less than an hour remaining in a special session that was […]<\/p>\n","protected":false},"author":426,"featured_media":24596,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_stopmodifiedupdate":false,"_modified_date":"","wds_primary_category":4,"footnotes":""},"categories":[4],"tags":[34,288,230],"yst_prominent_words":[],"class_list":["post-24595","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-alaska-legislature","tag-oil-and-gas-taxation","tag-state-news"],"_links":{"self":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/24595","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/users\/426"}],"replies":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/comments?post=24595"}],"version-history":[{"count":0,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/24595\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media\/24596"}],"wp:attachment":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media?parent=24595"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/categories?post=24595"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/tags?post=24595"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/yst_prominent_words?post=24595"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}