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Fairbanks vote key in Senate’s passage of oil tax bill

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Posted: Thursday, March 21, 2013 12:00 am | Updated: 6:24 am, Fri Mar 22, 2013.

JUNEAU — A Fairbanks vote was key to the Senate’s narrow approval of Gov. Sean Parnell’s proposal to cut oil taxes.

Sen. Click Bishop, R-Fairbanks, joined Fairbanks’ two other Republican senators in the 11-member majority that approved a tax cut that could cost the state as much as $6 billion in lost revenue throughout the next six years in a bid to stem Alaska’s decades-long decline in production.

The $6 billion figure is tallied without any new oil production coming online, which supporters like Sen. Pete Kelly, R-Fairbanks, hope it’ll produce.

“Our revenue is going to go down a little, but we’re thinking about the future,” he said. “We’re trying to extend production, we’re trying to increase production and extend it. So our kids will have something left.”

The 11 to 9 vote came at the end of a day-long floor session of the 20-member body that included impassioned and statistics-laden opposition put up by Democrats and two Republicans who had been staunch opponents in prior years.

The opposition offered 12 amendments that ranged from such measures that restored the progressive rate under the current tax structure to a three-year sunset on the bill.

Bishop’s support had been tentative after hearing lukewarm support from the oil industry, but he pressed the green “yes” button after the only amendment offered by the cut’s supporters passed.

The amendment eliminated a 2 percent drop in the bill’s 35 percent flat tax that was scheduled to go into effect in 2017. The change reduced the hit to lost revenue by an estimated $300 million per year, bringing in an additional $1 billion in six years.

After the floor vote, Bishop said the new fiscal impact was in a place where he felt comfortable.

“I just haven’t moved off my position of where I was on the campaign trail all summer long,” he said. “I said all year long that $2 billion is too much and $500 million wasn’t enough.”

However, the amendment only passed on the same 11-9 margin that carried the bill. Among the opposition was Minority Leader Johnny Ellis, D-Anchorage, who called it “chump change” in a post-session press conference.

Democrats were highly skeptical that the oil tax bill will result in the immediate boost to production that supporters have pointed to.

“I think you’ll begin to see the effects on this immediately,” he said. “I think you’ll begin to see painful cuts to necessary services in Alaska. We’ll have to embrace those because of falling revenues.”

Bishop was cautiously optimistic that the cuts would result in a change on the North Slope, but was adamant that he needs to see a “marked investment” of billions of dollars per year if the industry hopes to hold onto Wednesday night’s changes.

“Do I trust the oil industry? No, they haven’t proven it to me yet,” he said. “I’m just putting them on notice, right here and right now. They got one free pass with me tonight, and if I don’t see increased production, I’ll be the first one to file a bill to put it back on them, end of story.”

When asked if when he would make that determination, he said three years.

Sen. Gary Stevens, R-Kodiak, had put forward a sunset in three years, requiring the Legislature to extend the cut, but the bill reverted to the most current oil tax system.

The only “no” vote to come out of Fairbanks came from the Interior’s newest senator, Sen. Lyman Hoffman, whose district now reaches into Ester and Goldstream Valley thanks to redistricting.

Hoffman, who typically doesn’t speak on bills, called the vote on oil taxes critical.

“I’d have to say this is the most important vote I’ll be taking in my political career,” he said. “Having heard the debate, the stakes are too high for us to go all in without some assurances that we are going to be able to provide the services and protect the dividend that people deserve.”

He said he feels it’s every lawmaker’s duty to uphold the state’s constitutional mandate to develop Alaska’s resources to the maximum benefit of its residents, like his grandchildren.

“I won’t be able to look them in the face and tell them that’s what I have accomplished if I’m a ‘yes’ vote,” he said. “There is no way I would be able to do that, and that is why I am a ‘no’ vote.”

The bill was held for reconsideration by Sen. John Coghill, R-North Pole, meaning senators will get one more chance to vote on it before the body hands it off to the House.

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

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