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Morning Headlamp - Motor Fuel Tax to Triple Under Walker's Proposal


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According to recent filings, accounting adjustments tied to past royalty payments helped Alaska recover an extra $117 million from oil and gas companies last year, primarily because federal pipeline regulators determined that the North Slope's major producers overcharged to move royalty oil through the trans-Alaska oil pipeline. The Federal Energy Regulatory Commission in April ordered that certain costs associated with the "Strategic Reconfiguration" project that had been factored into pipeline shipping rates between 2009 and 2016 needed to be removed, leading to the accounting change that produced additional royalty income, state officials said.

 

Of the additional revenue, $90 million is tied to a decision by the Federal Energy Regulatory Commission in November 2015 that the owners of the pipeline, primarily BP, ConocoPhillips and ExxonMobil, could not charge higher shipping rates to pay for mistakes associated with a multiyear effort to modernize sections of the 800-mile pipeline.

 

Audits for production-tax payments made between 2007 and 2009 found the state was owed an additional $416 million in taxes, plus another $368 million in interest, from oil producers. Some of that money has been paid, and some of the assessments are being appealed to the state's Office of Administrative Hearings, said Ken Alper, director of the state's Tax Division.

 

Heads up, taxes coming. To help bridge some of the state's $3 billion budget gap, Gov. Bill Walker has proposed a bill that would triple the motor fuel tax statewide over two years. The tax charged on fuel varies by type. Right now, drivers pay 8 cents per gallon of gasoline at the pump. Aviation users pay 4.7 cents per gallon, marine users pay 5 cents per gallon and all other aviation users pay 3.2 cents gallon. If the bill is passed, the tax amounts for each fuel type will double on July 1, 2017 and will rise another 50 percent again on July 1, 2018, making the final increase 24 cents per gallon for drivers, 14.1 cents per gallon for aviation gasoline, 15 cents per gallon for marine fuel and 9.6 cents per gallon for all other aviation fuel types, according to the bill.

 

Walker proposed a similar bill in his FY 2017 budget, but the Legislature failed to pass it in the 2016 session. This year, Walker included the motor fuel tax increase in a separate bill as part of his overall fiscal plan for the state, which includes cutting state government operations 0.9% (from FY17 to FY18) and a plan to restructure the Permanent Fund earnings to run government.

 

Super Barrel. On Sunday, the American Petroleum Institute aired its first-ever Super Bowl ad with a similar opening line: "This ain't your daddy's oil." Jack Gerard, the president of the leading trade association for the U.S. oil and gas industry, acknowledged that he hadn't given much thought to the similar approaches to the ads. But after mulling over it for a moment, he said that for his industry, just the opposite is true. "A short decade ago, no one would have believed that the U.S. would be in the position it's in today in terms of oil and natural gas production, leading the world," he said in an interview Friday, referring to breakthroughs in drilling technology that have made shale reserves accessible.

 

First Reads

Energy royalty audits and adjustments brought Alaska an additional $117 million in 2016
Alaska Dispatch News, Alex DeMarban, February 5, 2017

Bill would triple fuel taxes over 2 years
Peninsula Clarion, Elizabeth Earl, February 5, 2017

Alaska must resolve the budget gap, encourage growth
Alaska Dispatch News, Jim Jansen & Marc Langland, February 6, 2017

Committee holds first meeting on bill to protect Bristol Bay
The Dutch Harbor Fisherman, Molly Dischner, February 5, 2017

Alaska Legislature funded lame-duck trips to Las Vegas and Quebec, even as it scales back overall travel
Alaska Dispatch News, Nathaniel Herz, February 5, 2017

Big Oil takes message to the Super Bowl
USA Today, Bill Loveless, February 4, 2017

AK Headlamp
A project of the Alaska Support Industry Alliance
3301 C Street
Anchorage, AK 99503

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