A resolution to the 23^rd Alaska State Legislature in SUPPORT of House Bill 441 and companion Senate Bill 321, short title: “Modification of Oil Severance Tax”; which would restore fair severance taxes on our state owned oil resources.
 
WHEREAS, the Alaska State Legislature is responsible for making the highest and best use of our natural resources; and
 
WHEREAS, in 1989 the Alaska State Legislature modified an incentive for oil companies to develop marginal fields called the “economic limit factor” or ELF; and
 
WHEREAS, the ELF was designed to encourage small field development; it now allows 12 of the 20 fields currently producing on the North Slope to pay NO severance taxes at all; and
 
WHEREAS, many of the fields receiving benefit from the ELF currently remain very profitable including the second highest producing oil field in North America at Kuparuk, which now only pays a 3% severance tax, and giant Prudhoe Bay which only pays a 12.9% severance tax; and
 
WHEREAS, Department of Revenue projections estimated the average severance tax collected in 1993 was 13.5%, but that average will fall to 4% in 2013 using the current ELF calculations; and
 
WHEREAS, proposed changes to the ELF could generate an additional $500 million for the state at $32/barrel; and
 
WHEREAS, at $32/barrel, corporate profits from Alaska North Slope oil exceed state revenues by $1.2 Billion, and that gap increases to about $1.5 Billion at $35/barrel; and
 
WHEREAS, the Alaska State Legislature has failed to reduce spending to sustainable levels, and is actively seeking new revenue sources; and
 
WHEREAS, proposed changes to the ELF could fill the current budget gap without broad based taxes or permanent fund raids; and
 
WHEREAS, all components of the fiscal picture should be debated openly with budget cuts, new revenue sources, and changes to the ELF all being part of that discussion; and
 
NOW, THEREFORE, be it resolved that the Alaska Voters Organization Board of Directors, support House Bill 441 and companion Senate Bill 321, as written this date, to receive a fair severance tax for our oil resources; and be it
 
FURTHER RESOLVED, that the 23^rd Alaska State Legislature adopt House Bill 441 and companion Senate Bill 321 as a possible solution to their budget crisis; and be it
 
FURTHER RESOLVED, that no discussion about changes to the Permanent Fund be considered prior to an open public debate on modification to the ELF; and be it
 
FURTHER RESOLVED, that no long range fiscal plan or meaningless spending cap be adopted unless it recognizes future revenue projections from all known sources as the upper budget limit and trims current operational cost to match that reality, thus assuring state budgets are adopted which are sustainable without borrowing from Alaska's future.
 
Adopted by the Alaska Voters Organization Board of Directors, this 14^th day of April, 2004 

Alaska Voters Organization, Inc.

P. O. Box 3293

Kenai, Alaska

99611-3293

(907) 776-8008

akvoters@gci.net