OIL TAX SURGERY: ACES

My decision for hip replacement surgery a couple weeks ago is surprisingly similar to Governor Palin’s decision to replace the Petroleum Production Tax (PPT) passed in March 2006. My hip was causing me problems, I had it evaluated, and decided it needed to be replaced - regardless of potential pain and suffering (which fortunately, has been minimal). Governor Palin felt the PPT was causing problems, had it evaluated, and decided to have it replaced – (regardless of potential political pain). A thoughtful person weighs the plusses and minuses of a major operation, and then makes a decision based on the information available. That’s what I did with my hip replacement surgery. That’s what Governor Palin did in deciding on PPT surgery. I’m sure it wasn’t an easy decision.

Legislators who voted on the PPT included a shocking number of legislators who are currently undergoing trial for bribery (among other things), have federal indictments, or who had their offices searched by the FBI. There may be more indictments. Who knows? The PPT that passed was subject to intensive lobbying and debate. Obviously, only a very few of our sixty House and Senate legislators are under suspicion of wrongdoing. We know it’s unfair to judge the many by the few. However, in politics, appearance can be reality. As an unfortunate result (rightly or wrongly), our overall vote on the PPT has, at least, the appearance of being tainted. The “taint” is another reason to revisit the oil tax issue, in addition the PPT not working, according to the administration, as most of us intended it to work.

Therefore, Governor Palin is bringing forth a new plan she calls the “Alaska's Clear and Equitable Share,” or “ACES.” The governor outlined the basics of her ACES proposal at a news conference today held at the University of Alaska Library Consortium in Anchorage. I support Governor Palin’s effort to bring a resolution to oil tax issues.

Governor Palin’s ACES plan is a hybrid of a tax on the gross and a tax on the net. In Speaker of the House Rep. John Harris’ words, “. . . it seems to offer change but not a huge overhaul.” ACES would increase the current 22.5% tax on net profit to 25% (which was one of the proposals during the PPT debate), but there would be a 10% gross-based tax floor on older oil fields. The new proposal also includes language that would prevent producers from deducting costs of corroded pipes and the like. None of us have seen the details of the ACES proposal, and there may be a “devil in the details.” However, at this point the concept of ACES is reasonable.

So far, the oil producers are less than happy with the governor’s ACES plan. That’s hardly surprising. No one wants to pay higher taxes. Their job is to maximize profits to their shareholders. On the other hand, it’s the job of the governor and legislators to maximize the return to our “shareholders” - the good people of Alaska who elect us to protect their interests. The oil producers are not our enemies. They have done many great things for Alaska - and will continue to do so.

There were several legislators present for the press conference. We all have our work cut out to do in the upcoming October Special Session.

Photo at top shows Gov. Palin speaking at her Press Conference. The middle photo shows me discussing the ACES plan with the governor, and the bottom photo shows me with University Chancellor and former Lt. Governor Fran Ulmer, and Speaker of the House Rep. John Harris.