The Observer, July 2006

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Prospects remain uncertain for a fix to budget problem in state’s oil-spill office

Alaska’s lawmakers went home from Juneau last month without addressing one of the citizens’ council’s top priorities: ensuring stable long-term funding for the state agency in charge of oil-spill prevention and response.

That agency – the Division of Spill Prevention and Response in the Department of Environmental Conservation – is financed primarily by a tax of three cents per barrel on crude oil produced in Alaska. But that revenue is declining as oil production drops. As a result it no longer can fully support the spill division and the council has proposed increasing the tax.

Despite bipartisan support for the idea, the Legislature’s regular session ended May 9 with no action on it. A special session started the next day, as called by Gov. Frank Murkowski. It ended June 8, also without action.

The battle may not be over, however. As the Observer went to press in late July, the Legislature was in another special session to consider the overhaul of Alaska’s oil taxes, including the one that funds the oil spill agency.

Though the spill division’s long-term funding remains uncertain, its budget appears safe for the next couple of years. A political compromise during the regular legislative session will temporarily supplement its funding with money from an account financed primarily by a levy on cruise ships.

The Legislature this year has focused on Murkowski’s proposed natural gas pipeline contract with North Slope oil producers, and on his related proposal for revising the state’s oil and gas taxes. Long-term funding for the spill division has been addressed in the proposed tax legislation.

The version that died with the June 8 adjournment of the special session would have increased the per-barrel tax from three cents to four for the spill division. That was a penny less than the five cents per barrel sought by the council. The council believes a four-cent tax would be a relatively temporary fix, while the five-cent tax should stabilize the spill division for several years.

The council also called for inflation-proofing a state oil-spill response fund currently financed by a crude oil tax of two cents per barrel. That fund is capped at $50 million and the tax is suspended when the fund reaches that level. The council had proposed immediately raising the cap to about $70 million to offset inflation since the fund’s inception in the mid-1990s, and increasing it annually in the future to match the inflation rate. That proposal never made it into any bill before the Legislature in the 2006 sessions.

The council plans to keep pressing for these measures until stable funding is assured for the oil-spill division.