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Governor Parnell Vetoes Tax Increase

April 29, 2010, Juneau, Alaska - Recognizing potential adverse impacts on oil and gas operations and explorers, Governor Sean Parnell today vetoed Senate Bill 305, legislation that would have "decoupled" Alaska's petroleum taxes through separate levies on oil and gas production. This is the governor's first veto.

"SB 305 effectively would have levied a significant overall tax increase on companies engaged in oil and gas production," Governor Parnell said. "At a time when my administration proposed tax credits to incentivize more Alaska jobs in the oil patch, a tax increase would send us in the wrong direction.

"Changing the tax regime now could be a destabilizing influence and adversely affect the two upcoming open seasons for Alaska natural gas shipping commitments, the first of which begins tomorrow."

The governor also noted the opinion by Attorney General Dan Sullivan that the Legislature has broad flexibility to change production taxes either before or after the open season. "The state has up to 10 years before gas starts to flow in which to determine the appropriate tax system. We should not be changing the tax regime now and then again after the open season.

"While the legislative hearings on SB 305 were a worthwhile exploration of important state policy issues, not enough consideration was given to the complexity of the subject. I fully expect the state and producers to be discussing fiscal system issues over the next few years, leading up to a decision to sanction the gasline project around 2014. The debate about SB 305 provides a valuable starting point."

Copies of the governor's veto letters are available at: http://gov.alaska.gov/parnell_media/documents/gov_TransmittalLettersSB305.pdf

The governor's comments on SB 305 can be heard at: http://gov.alaska.gov/parnell_media/audio/SB305.MP3



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