JUNEAU, Alaska — Gov. Sean Parnell on Wednesday called on Alaska lawmakers to pass "meaningful tax reform" to spur new oil production, and laid out a timetable for progress toward a natural gas pipeline.
In his third — and strongest worded — State of the State address, Parnell issued a call to action, saying the state's future depends on steps taken during this legislative session.
"Rather than hunkering down and hoping for the best, it is time to act," he said.
While noting Alaska remains stable in uncertain economic times with an unemployment rate below the U.S. average and a foreclosure rate that is among the lowest in the nation, Parnell also cited in his address five areas of focus to chart a course to faster growth and more opportunity. Those are being smart with the state's money, limiting government spending while making investments in needed infrastructure and saving for the future; encouraging new oil production by changing the state's tax structure; developing Alaska's natural gas and creating a friendlier environment for entrepreneurs and resource development.
Parnell, a Republican, has maintained that overhauling Alaska's oil production tax is necessary to boost investment and help reverse the trend of declining oil production. Oil is king in Alaska and the state relies on oil revenues heavily to run.
A version of Parnell's tax-cut bill, HB110, stalled in the Senate last year after clearing the House, with leaders saying they didn't have sufficient information to make a sound policy call.
Critics of the plan also said that it amounted to a corporate giveaway, potentially costing Alaska up to $2 billion a year in revenues with no guarantees that companies would invest more here.
The Department of Revenue has called the $2-billion figure a worst-case scenario, occurring by about fiscal year 2017 if Parnell's tax-cut plan passes and there's no new investment. But the administration has cast that as an unlikely scenario, arguing that the governor and Legislature would never let a tax regime that wasn't working stand for years on end without change.
Parnell on Wednesday called for "meaningful tax reform," while stopping short of describing just what meaningful means. Last year, in reiterating his support of HB110, said the state needs a "game changer" — more than tweaks — to reverse the trend of declining production.
Parnell, in his speech, asked lawmakers to "join me in refilling Alaska's pipeline to prosperity. You have had time to study this issue closely. We cannot allow the paralysis of analysis to set in. We must act, and we must act now."
Parnell has set a goal of having 1 million barrels of oil a day run through the trans-Alaska pipeline. Throughput has been averaging around 600,000 barrels a day.
He also has been pushing for progress on a long-awaited natural gas pipeline. A pipeline has been seen as a way to shore up revenues as oil production declines, create jobs and provide more reliable energy. But there has been little movement on a line that would serve North America markets.
In October, Parnell called on Alaska's major North Slope players — Exxon Mobil Corp., BP and ConocoPhillips — to unite behind a project that would allow for liquefied natural gas exports to the Pacific Rim if the market has truly shifted away from the Lower 48. The CEOs of the companies expressed a willingness to talk.
But Parnell on Wednesday set timelines for progress, after saying he'd spoken to the CEOs within the last 24 hours and learned that agreement on key issues had yet to be reached. He said the companies must agree to resolve a long-running dispute over leases on the Point Thomson gas fields. He announced a settlement between the state and Exxon late last year but other interest-owners, including BP and ConocoPhillips, also must sign off.
Court action was delayed while a settlement was pursued, by Parnell said the state will fight for its interests at a Feb. 8 hearing before the Alaska Supreme Court if there's not a full resolution by then.
He also said he expects alignment by the three companies under a pipeline project to tidewater by the end of March. Alignment must come under the framework of the Alaska Gasline Inducement Act. He said he expects conclusion of talks to determine whether a big line and smaller, in-state line can consolidate by the third quarter of the year. Also by September, he wants the companies to harden their numbers on a liquefied natural gas project and to identify a work schedule.
If those milestones are met, he said the legislature can take up gas tax legislation next year.
On Wednesday, the Senate Finance Committee introduced legislation that would separate oil and gas production, for purposes of taxation, indicating that members of the Senate may want to address the issue sooner if an oil tax bill advances in the chamber. This week, Senate President Gary Stevens said he would like to see the Senate craft its own version of an oil tax bill.
Parnell said while he and lawmakers might not always agree on the means, "we do have a common vision for the ends: more opportunity, more prosperity, more freedom. Let this be the legacy we leave our children and grandchildren."
In response to the speech, House Minority Leader Beth Kerttula, D-Juneau, said her caucus wants to make sure Alaska gets its "fair share," if there are any changes to the oil tax structure. She said her caucus would stand against any effort to "give away our resources."
Stevens, R-Kodiak, who leads a bipartisan majority, told reporters that Parnell is right in saying this will be an important legislative session, particularly as it pertains to oil and gas issues and trying to find "meaningful solutions." Sen. Joe Thomas, D-Fairbanks, said he'd like to see a plan that delivers increased production and doesn't simply give money away to companies and leave the state "hoping for the best."
Becky Bohrer can be reached at http://twitter.com/bbohrer.
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