Senate panel sets right tone for tax debate

In many ways, negotiations over a new oil and gas tax formula place Alaska, and Alaskans, squarely at a crossroads. High prices and record industry profits have put virtually everyone in agreement that the current tax system is insufficient. Yet there is little agreement over just what changes should be made.

Despite the advice of analysts that 25 percent is an adequate base rate of taxation, Gov. Frank Murkowski has proposed a plan that would impose a 20 percent production tax on the industry while providing a 20 percent tax credit on capital investments. The governor has linked passage of such a tax plan with finalizing a deal with three North Slope producers to build a natural gas pipeline.

Industry has expressed support for the Murkowski plan, and that should be evidence enough that there is room for the people of Alaska to take a larger cut from the development of their resources. A state Senate committee appears to have recognized this when it heard the governor's plan last week.

The Senate Resources Committee, chaired by Kenai Republican Tom Wagoner, adjusted the tax rate to the recommended 25 percent level before passing the bill on to the House. We applaud senators for being willing to question the governor's proposal and for not bowing to the will of industry. It is an example that we encourage other committees and legislators to follow as the plan makes its way around the Legislature.

There is a dizzying amount of facts, figures and forecasts floating around the capital these days. Industry support groups are also spending millions on warm and fuzzy television advertising designed to convince Alaskans how wonderful the industry is and, more important, how sufficiently taxed industry already is.

But a look around the world at other oil and gas markets tells a different tale. Worldwide, industry pays an average of 80 percent in royalties to a host government. The number here in Alaska over the years has been closer to half that, making the state the lowest taxing oil producer in the world

Considering that companies like BP, Exxon Mobil and ConocoPhillips get to do business in Alaska without also having to hire a permanent, around-the-clock security force to keep facilities safe from attack, like they do in many other markets around the world, the cost of doing business here is especially cheap. It is hard to be sympathetic, then, to industry warnings about the potential dangers of &#8220overtaxation.”

Article 8, section 2 of the Alaska Constitution states &#8220The legislature shall provide for the utilization, development and conservation of all natural resources belonging to the state, including land and waters, for the maximum benefit of its people.”

There is still plenty to be worked out before a final solution can be put on the table. But when sifting through all the available information, lawmakers need only remember this simple constitutional charge, and the trust placed in them by those who elected them, to know that they are doing the right thing for the future of the state and its people.