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Fairbanks Senate races play key role in oil tax debate

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Posted: Saturday, October 27, 2012 11:52 pm | Updated: 11:52 am, Mon Jan 21, 2013.

FAIRBANKS — This year’s legislative candidates may talk about energy relief, spending or education, but the biggest statewide issue of this election season is oil taxes. The future of that debate likely hinges on the makeup of the state Senate.

Gov. Sean Parnell’s attempt to lower oil taxes stalled during this year’s legislative session at the hands of a skeptical coalition of Democratic and Republican senators known as the Senate Bipartisan Working Group. Coalition members wanted assurances tax cuts would lead to increased oil production and believed there was little justification for the governor’s reduction.

Things could change next year when the next Legislature convenes. Under the most recent round of redistricting, 19 of the Senate’s 20 seats are on the ballot, providing a prime opportunity to dramatically shift the balance of power in the Senate.

Campaign spending has reflected that opportunity.

Industry, Republican Party and outside money has poured into this year’s elections around the state in a bid to break up the coalition and replace it with a Republican-only majority. Union money, meanwhile, has come in strong to support at-risk coalition members.

Attention has come to Fairbanks, where two key Democratic senators, Joe Paskvan and Joe Thomas, are up for re-election.

In particular, Paskvan, as the co-chairman of the Senate Resources Committee, was one of the biggest critics of the governor’s approach to oil taxes.

Each faces a strong opponent: Paskvan is facing former state Sen. Pete Kelly. Thomas is running against a Senate colleague, Sen. John Coghill, a Republican who is not a part of the coalition.

Supporters of the governor’s efforts say the current oil tax structure, known as Alaska’s Clear and Equitable Share, has too large of a government take at high prices. They warn that the tax system has stopped investment and is leading to a decrease in oil throughput that threatens Alaska’s revenue and the future of the pipeline.

Opponents, such as Paskvan, argue that it’s incorrect to blame a 20-plus-year decline in throughput on an oil tax system that has existed for a quarter of that time. He says industry evidence shows the decline is the result of long-term investment decisions and the science of a mature oil field, not oil tax policy. They argue that efforts to fill the pipeline should focus on non-traditional forms of oil as well as developing new oil fields.

After much back and forth and behind-closed-doors discussions, the Senate coalition, which includes 10 Democrats and six Republicans, produced its own oil tax plan that specifically incentivized production of new oil from new oil fields. That plan passed the Senate 17-3 near the end of the session but didn’t get final legislative approval.

Change already has been brought to the Senate this election season. Two coalition-friendly Republican senators were defeated in primary challenges by anti-coalition candidates in August. At the very least, that likely will increase the size of a Republican minority and deprive the coalition of its 16-member supermajority. That’s important because currently the four-member Republican minority — consisting of GOP senators who aren’t in the coalition — isn’t recognized as an official caucus and, thus, is denied any guaranteed committee appointments and has little substantive say in any legislation.

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

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