Alaska Debates Its Dependency on Oil Industry As the price of oil escalates, Alaskan politicians are in special session in Juneau, mired in a debate over raising the windfall profit tax on oil companies from 22 percent to 25 percent. Meantime, four state legislators face corruption charges for taking money from the oil industry.
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Alaska Debates Its Dependency on Oil Industry

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Alaska Debates Its Dependency on Oil Industry

Alaska Debates Its Dependency on Oil Industry

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The Alaska legislature is considering once again how much the state should collect from the oil industry. Last year, when Alaska changed the tax structure, the FBI investigated and found that lawmakers were bribed to support an industry-friendly version of the tax bill. Now, legislators say they aim to restore the public's trust with a tax system that could bring in as much as a billion and impasse more dollars a year.

Elizabeth Arnold has the story.

ELIZABETH ARNOLD: Alaskans are well aware of their less-than-stellar reputation when it comes to oil.

(Soundbite of movie "The Simpsons Movie")

ARNOLD: A scene from the recent "Simpsons Movie" sums it up when Homer was welcomed at the state line with a check for a thousand dollars like every other Alaskan for, quote, "allowing the industry to destroy the state's natural resources."

That would be the permanent fund dividend check, or PSD check, which is actually the interest from a fund set up to sustain the state when the oil runs out. So every year checks are sent out and there are PSD sales on dishwashers, snowmobiles and airline tickets, while Alaskans are feeling flushed.

Economist Scott Goldsmith says oil accounts for a third of the jobs and total income here.

Dr. SCOTT GOLDSMITH (Economist, University of Alaska): It is huge, yeah. Since we were bought by Russia, about 90 percent of all the value of natural resources produced from the state has been oil. They're big numbers and it's really hard to get your hands around.

ARNOLD: But just how closely tied the state and oil have become over the years shocked even Alaskans recently, as three state legislators were sent to prison for taking bribes from the oil industry to keep the tax rate low. They were convicted after executives from VECO, an oil field services company, pled guilty and served as key prosecution witnesses. The FBI probe continues and includes some members of the state's congressional delegation as well. That's why Governor Sarah Palin called a special session after deeming the tax path in the last session a failure, tainted by corruption. So for the last month, legislators have met in Juneau to take another look at the state's share of oil revenues.

Unidentified Man: If we don't get started, we're never going to get through. Next, we will move to amendment number five. Amendment…

ARNOLD: The mood at the Capitol has changed dramatically since it was raided by the FBI in August. No longer do oil lobbyist line in the benches outside offices and House and Senate chambers, nor do they wine and dine lawmakers. Suspicion and caution reign as colleagues fear hidden cameras and tape recorders. Public sentiment has changed as well. A popular bumper sticker seen around the state says: Thanks, FBI.

It's also changed the debate. More legislators are now on record in favor of raising taxes on the industry, not only in the interest of fairness, but also to send a message that Alaska rejects corruption. Fairbanks Republican, Mike Kelly.

State Representative MIKE KELLY (Republican, Fairbanks): I think we have to recognize that the reason we're down here is that we have folks that are either indicted, convicted or under investigation. And they weren't the janitors around here.

ARNOLD: The industry still has its stalwart supporters, those like Anchorage Republican Mike Hawker, who want to keep the tax rate the same. And they're just as likely to prevail.

State Representative MIKE HAWKER (Republican, Anchorage): The power to tax involves the power to destroy. I don't believe anyone has ever convinced me that a government has ever taxed an industry into productivity.

ARNOLD: The oil company has mounted an intense media campaign to stop any increase in the name of stability. At a standing-room-only industry conference this week, computers were setup in the lobby and attendants were urged to e-mail their legislators. Doug Suttles is the president of BP Exploration in Alaska.

Mr. DOUG SUTTLES (President, BP Exploration): What we need right now is more oil, you know. It's declining, it's declining relatively rapidly, and the only way to slow that down is with investment. And what we should be talking about is how do we find the barrels for the next 30 years instead of this, what seems to be a piling on and this, let's take every penny the industry makes in this state and give it to the state.

ARNOLD: Alaska's Lieutenant Governor Sean Parnell, says the state and the industry have different constituencies.

Lieutenant Governor SEAN PARNELL (Republican, Alaska): Our shareholders need trust restored in our tax regime. That's what this is about.

ARNOLD: Despite that desire for trust, it is possible legislators will head home without an oil tax bill. They say there's a midnight Friday deadline. The last time the legislator tried to increase the tax, FBI surveillance tapes revealed that an oil industry lobbyist asked the Senate president to run out the clock. If that happens again, the governor says, she'll call another 30-day special session.

For NPR News, I'm Elizabeth Arnold in Anchorage.

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