The bill replaces legislation passed last year known as the "Petroleum Profits Tax" that has since been questioned following an ongoing corruption investigation involving state lawmakers and oil executives.
"We have revisited a tainted oil tax system called PPT. We have fixed it," Palin said yesterday.
Palin's bill is expected to boost state oil and natural gas revenues by $1.5 billion this fiscal year.
It raises the basic state oil production tax by 2.5 percentage points to 25 percent. It also eliminates a series of deductions the petroleum industry has long enjoyed in the state.
State legislators passed the tax Nov. 16 at the close of a 30-day special legislative session called by Palin.
The governor said that the new tax will maximize the value of the state's natural resources, adding that Alaska will use the additional revenues responsibly.
"We are going to save, invest wisely today and save for the future for when that price of oil isn't nearing $100 a barrel and maybe the federal largess, the dollars we get from the federal government, are not flowing as freely into our state coffers as perhaps they have been flowing in the past," she said at the signing ceremony.
Kara Moriarty, deputy director of the Alaska Oil and Gas Association, said the tax increase could inhibit long-term development. "Are the oil companies going to go away Jan. 1, 2008? The answer is no. The more important question is, what effect will this new tax have on new projects?" she said (Yereth Rosen, Reuters, Dec. 19). -- EB
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