Oil taxes, gas pipeline keys to Parnell legislative agenda BUDGET RESERVE: Susitna dam hydro project also a high priority.

Sean Parnell on Tuesday begins his first legislative session as Alaska's elected governor, freed from his caretaker status as Sarah Palin's replacement. He'll try to lower the oil tax championed by Palin and push forward on the multibillion-dollar Susitna dam.

Parnell comes into the three-month legislative session enjoying a state budget reserve of about $10 billion, the envy of cash-strapped states around the nation. Big money from high oil prices and the oil tax have flowed to the state even as North Slope crude production continues the decline that began after 1988.

The success of Parnell's next four years as governor could be judged on whether there's real progress on building a natural gas pipeline to the Lower 48.

The outlook for that is murky going into Tuesday's start of the session, with the state-funded TransCanada Corp. in private negotiations with the companies that have North Slope gas leases. There's also a separate effort put together by BP and Conoco Phillips called the Denali Project. There is deep skepticism among lawmakers that either will happen.

Parnell said he expects to hear from TransCanada during the legislative session about the results of its bids from gas producers. In the meantime, Parnell said, the state is working on negotiating a settlement with the oil and gas companies on the disputed leases at the Point Thomson field, vital for the gas line prospects.

The proposed Susitna River hydroelectric project is generating more excitement among legislators at the moment. Advocates talk of the potential to supply half of Southcentral Alaska's electricity demand. Parnell endorsed the project but not all legislators are convinced it's a better solution than other options, including the proposed Chakachamna Lake hydro project on the west side of Cook Inlet.

The Susitna dam has a price tag estimated at $4.5 billion. "We have to begin pushing aggressively for the Susitna project and one of the first steps is to determine what is the best way to finance such a project," Parnell said in an interview last week.

Parnell is asking the Legislature for $65 million to do preliminary work on Susitna, an amount that would drain most of the state's Railbelt Energy Fund.

Parnell also is asking for $7.4 million in domestic violence and sexual assault prevention, and increased penalties for some child pornography crimes and legislation "against graphic texting as well, known as sexting."

CUTTING THE OIL TAX

Alaska lawmakers are describing the battle over oil taxes as the defining issue of the legislative session. Tax opponents count on a push from Parnell to help them lower how much the companies are required to pay the state.

"I am glad to hear the governor has finally come out and supported looking at the taxes and looking at what revisions may need to be made to move Alaska forward," House Speaker Mike Chenault said at a recent policy forum.

Parnell supported the 2007 oil tax increase when he was Palin's lieutenant governor and didn't propose fundamental changes as he finished out her term when she resigned in 2009. But Parnell has begun calling for major changes. He outlined the basics of the plan as he campaigned last fall for the full four-year term as governor.

Parnell said he'll be introducing a bill to limit how much the profits tax can go up as oil prices rise, a huge part of how the state collects money from the companies.

Parnell also will renew his attempt to offer the companies more tax credits if they drill wells in Alaska. He said the specifics of his proposal will be released in the coming days and at this point it is not clear how far he is going to go.

"Right now we have one of the most stable economies among the states, we have the strongest foundation. But one sector that is hurting is oil-field services employment," he said.

Advocates of deep tax cuts will have stiff opposition. Opponents argue total oil jobs are still listed by the Department of Labor as higher than before the 2007 tax increase, and that there's no assurance taxes are behind the decline in jobs over the last two years.

"As a state, are we willing to cut oil taxes by billions of dollars with no guarantees of increased production, no guarantees of more Alaskan jobs, no guarantees of more oil in the pipeline. I just don't know that the Legislature is going to go for that," said Anchorage Democratic Sen. Bill Wielechowski.

Parnell said a company like Exxon Mobil can't tell the state exactly how its board of directors is going to distribute investment dollars a year in advance. But Parnell said he will be seeking some kind of a verbal commitment, giving as an example the cruise-ship tax cut he pushed through last year.

"They can make a statement on the record that making Alaska more competitive will drive investment here," Parnell said.
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