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Battle for District B heats up between Kelly, Paskvan

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Posted: Sunday, October 28, 2012 12:00 am | Updated: 11:52 am, Mon Jan 21, 2013.

FAIRBANKS — The race between Democratic Sen. Joe Paskvan, of Fairbanks, and former Republican Sen. Pete Kelly has been one of the most contentious races in the Interior.

Both candidates have experience in the Legislature.

Kelly served in the House from 1995 to 1999. He was elected to the Senate in 1998 and served one term, reaching the powerful position of co-chairman of the Senate Finance Committee. He decided not to run again after that decade’s legislative redistricting. He later worked as the University of Alaska’s director of state relations.

Paskvan won in an open race in 2008, defeating Cynthia Henry. During his term, Paskvan has made a name for himself in the Senate as an authority on the oil industry and is the co-chairman of the Senate Resources Committee, a committee that’s closely tied to reviewing any oil tax policy.

•••

Paskvan, as the co-chairman of the Senate Resources Committee, has been the lead person on oil taxes in the Senate, often questioning forecasted revenue, predicted investments, the science of oil production and the impact on jobs. He particularly was skeptical about statements from the industry.

Paskvan said his work can be summed up by words of former Alaska U.S. Sen. Bob Bartlett, who warned that Alaska is at risk of “exploitation under a thin disguise of development. Taking of Alaska’s mineral resources without leaving some reasonable return for the support of Alaska governmental services.”

“When there’s no commitment to increase throughput on the oil fields and there’s no commitment to actually hire Alaskans, it makes sense to be opposed to a giveaway with no commitments,” he said.

Kelly has been critical of the Bipartisan Working Group’s recent approach to working on oil taxes. He accuses the group, of which Paskvan is a member, of playing politics with oil tax reform and said the Senate never was serious about lowering taxes and instead made a show of questioning everything to stall the issue.

“The truth is, in the 2011 session, the companies with the most information and expertise regarding production of oil on the North Slope were not given one single minute of testimony to testify in Paskvan’s committee on taxes,” Kelly stated in an email exchange with the News-Miner. “At the end of the regular session, Paskvan and other working group members claimed they needed more studies and information.”

“It was clear that the majority was not sincere about dealing with the governor’s oil tax bill and they used Paskvan’s committee to slow it down enough to kill it,” he said, adding that an initial proposal offered by Paskvan could have been a tax increase. “(Paskvan) either lacks sincerity and has no intention of offering incentives, or he is incompetent and can’t.”

Kelly believes Alaska’s current tax regime, which takes an increasingly larger share of profits at high oil prices, has killed investment in Alaska. He points to areas in the Lower 48 that have lower production tax rates.

“North Dakota and other places are kicking our rear ends right now, and they are attracting the investments in their oil fields that we desperately need. With oil prices at historic highs, we should be in the middle of a boom that would last decades,” he said. “Instead, because of the short-sightedness of our politicians, we are living in an era when decline is the new normal.”

The comparison between North Dakota and other Lower 48 oil booms like in Texas and in the Marcellus formation of Pennsylvania, West Virginia and Ohio is one with which Paskvan has taken issue. He says those booms have been driven largely by an advance in technology paired with high oil prices that has made shale oil, accessed through the capital-intensive hydraulic fracturing process, more profitable.

That technology, he said, is coming to Alaska. He argues that’s what the Legislature should focus on.

Additionally, Paskvan points out that Alaska’s oil production decline began in the late 1980s, well before the current tax system was implemented. He says the decline is the product of decisions made under a previous tax regime that had much lower government take.

“It has nothing to do with taxes, and it has everything to do with the engineering, science and physics of the fields,” he said.

Instead of a broad-based tax cut like what Gov. Sean Parnell wants, Paskvan argues the state should focus on bringing new oil fields and new technologies online. The Senate did pass a bill that would have lowered taxes on new oil from new oil fields, but that failed to get traction from the industry or the governor.

“How do you fill the pipeline? You fill the pipeline with your unconventionals; with the viscous, the heavy and the shales and then you move out into the NPR-A,” he said, referencing the National Petroleum Reserve-Alaska, “and then you move out to off-shore drilling.”

As far as handling traditional fields, Paskvan agrees that something should be done about taxes at high or very high prices. He’s a supporter of a new tax system that keeps it revenue neutral at prices up to $100 and looks at reducing the slope of progressivity and or capping it at high or very high prices.

While Paskvan may attract much of the flak and ire of his opponents, many have agreed with his approach to handling oil taxes.

At a candidate forum hosted by the Greater Fairbanks Chamber of Commerce, Kelly said he would do something similar to Paskvan’s plan. In an interview with the News-Miner, he said he wouldn’t have supported the governor’s proposal as written.

“The simplest fix on oil taxes right now is to bracket progressivity and cap it at a rate to be determined,” Kelly said. “I probably would not have supported the governor’s HB 110 as written and would have had to give consideration to amending it.”

Kelly said the flaw of Paskvan and the coalition is that they aren’t willing to work with the industry to find common ground to make Alaska more competitive with other tax structures and make it a place worth investing. The flaw, he says, is that the coalition is trying to incorporate too many perspectives and, because of that, fails to develop passable legislation, something he says he would be able to achieve.

Contact staff writer Matt Buxton at 459-7544 or follow him on Twitter: @FDNMpolitics.

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