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Rep. Lynn &
Alaska Adjutant General Craig Campbell

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24th Alaska State Legislature
The 24th Alaska State Legislature
Alaska State Representative Bob Lynn
Legislative Update

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Bob Lynn Communicates
Legislative Update for April 28, 2006
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Released:
April 28, 2006


 

Oil Taxes - The Great Debate

The proposed changes in oil taxes, and a potential gas pipeline contract, are the most important issues that will be before the Legislature in our lifetime. The governor has proposed changes to the oil tax, and those changes have been hotly debated in both House and Senate committees. It's important to remember that the governor proposes; the legislature disposes. The governor's administration and the legislature are separate branches of government. One doesn't work for the other, but both are supposed to represent as best they can determine the best interests of Alaska.

I must say it's disturbing that we are in the position of negotiating an oil tax, with the gas pipeline proposal hidden from view. The governor and the producers know all about the presumptive gas pipeline deal, but the Legislature does not. That puts the Legislature in the position of attempting to represent our constituents without having all the cards on the table, and I don't like it. It stinks. It's like wanting someone to buy your house, but the buyer can only see half the house until after the sales contract has been signed.

This session I'm not on the House Resource Committee or House Finance Committee, and have not been a direct party to the debate. However, I have sat in on some of the briefings, and I discuss the issues with my colleagues daily. When the oil tax bill, and later the gas pipeline bill, reach the House floor, I'll have to cast what will undoubtedly be the most important votes in my entire legislative career.

I do, however, have concerns about the best way to structure a new oil tax. The producers want fiscal certainty as the foundation of future explorations and operations. That makes sense. Obviously, they want the tax rate to be as low as they can negotiate. That's just good business. On the other hand, the state wants to obtain the maximum possible in revenue from oil without "killing the goose that laid the golden egg." The appropriate tax must be a "win-win" for everybody in Alaska, now and in future generations.

Without oil production, it doesn't matter how high the tax rate - i.e. 100% of zero equals zero. Production is as important as tax rate. The oil tax must be crafted so there are proper incentives for exploration and for increased production. We also need to encourage reinvestment of oil profits back into Alaska. We are in competition with oil-producing nations around the world. Our producers are multi-national companies, and they will go where they can make the most profit with the least amount of problems. Alaska isn't the Lone Ranger when it comes to oil and gas natural resources. Alaska must compete in the world market.

The governor has proposed a 20% tax (he had previously wanted 25%), and the producers accepted 20%. I suspect there's some wiggle room for negotiation by the Legislature. That should be reasonably expected from both the governor and the producers.

The concept of a sliding tax rate may have merit, but the ideal percentages are debatable. The question is, how far should the rate slide in both directions? I would also like to see a minimum percentage that would be in place so that, however low the price of oil, some amount of revenue always accrues to the state.

"The other side of the coin, it could be said, is: "tax what you want less of; subsidize what you want more of." So you can see the dilemma we face as we try to balance the equities between the state and the producers.

I'm not happy with the massive lobbying campaign from the oil producers: television, radio, newspapers, and even paid trips to Juneau for oil company employees who live in senators' and representatives' home districts. Apparently, they have enough profit to pay for such expensive campaigns. I'm especially unhappy with threats in the media that, if the Legislature doesn't accept the governor's tax proposal, they will not have enough money to continue contributing to charities (which are, by the way, tax deductible). As one of Shakespeare's characters said, "Methinks thou protesteth too much."

When push comes to shove on the oil tax question, I'll have to push a "Yes" or "No" button and vote for whatever comes to the House floor. Hopefully, my constituents will weigh in on the issues, and communicate and help me represent my district in the best manner possible. The better the communication the better the representation.

Bills on the Move ...

I've successfully passed eight bills and one resolution out of the House to the Senate. Some of the bills have already passed through more than one Senate committee. Legislation includes a bill making it an aggravating factor if someone previously diagnosed with HIV/AIDS commits a rape or other sexual assault. There are only a few days left before the end of the session, and House members are doing their best to get bills through the Senate gauntlet before the gavel comes down May 9th.

BLOG: Please remember to check out my Legislative Blog (Internet Journal) at www.alaskadistrict31.blogspot.com. I try to update it every few days. Entries include comments on very serious issues, as well as some light-hearted comments such as "Unofficial Things I've Learned in the Legislature."

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