Governor Sean Parnell delivered his fourth State of the State Address last night. During the address a joint session of the state legislature, Parnell called for continued focus on education, safety and respect, instate gas, and oil tax reform…
Gov. Parnell: “Our state’s prosperity has always rested on natural resources. Tonight, that foundation is at risk, not because we are running out of oil, but because we are running behind the competition. Alaska’s North Slope has billions of proven barrels, and billions more waiting to be discovered. What we do not have is a tax system that attracts new investment for greater Alaska oil production. Our problem is not below the ground. Our problem is above the ground. One recent analysis shows a company will make substantially more, at today’s oil prices, by investing in the Lower 48, rather than in Alaska.”
Over the past year, Alaskan production has dropped behind North Dakota in oil production. If this trend continues, we will soon fall behind California into fourth place in U.S. Production. Parnell said, what’s making matters worse, our laws give tax credits based on how much money companies spend in oil fields, not based on how much of that spending leads to production.
Gov. Parnell: “While Alaskans haven’t always seen eye to eye on these issues, we can all see the obvious: Unless we restore balance to our tax system, our oil fields will become obsolete. We must make reforms – and we must make them now. Waiting only makes this problem worse. By eliminating progressivity, and rebalancing capital tax credit payments, we can create a simpler 25 percent tax. Gone will be the old arguments about what qualifies for the capital expenditure credits. Gone will be the need to calculate progressivity each month.”