The Observer, September 2006
Legislature approves a partial fix to oil-spill office’s funding problems
Gov. Frank Murkowski last month signed into a law a bill that increases 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 – until now has been financed primarily by a surcharge of three cents per barrel on crude oil produced in Alaska. The levy will increase to four cents per barrel under the new law, which the Legislature passed in early August during its second special session this year. Murkowski signed it on Aug. 19.
Executive Director John Devens met with Rep. Kevin Meyer, shown here, and other legislators to discuss funding for the state spill-response office. Photo by Stan Jones
The surcharge change was a relatively minor provision in an oil tax bill that had tied the Legislature up almost from the time the regular session started in January. The bill raises taxes on oil-industry production profits and is projected by Murkowski to increase state income by as much as $2.2 billion a year at current oil prices of around $70 per barrel.
The council had backed the idea of increasing the surcharge, but wanted it raised to five cents a barrel rather than the four cents finally approved.
An increase was needed because revenue from the original three-cent levy has dropped with declining oil production and as a result could no longer support all of the spill division’s work.
In the council’s view, the four-cent tax will be a relatively temporary fix, whereas the five-cent tax would have solved the spill division’s budget problems for several years.
“We ended up with half a loaf,” said John Devens, executive director of the council. “It’s better than nothing, but it doesn’t fully solve the problem. So we expect the question of spill prevention and response funding will be back before the Legislature relatively soon.”
The council had 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. The tax is suspended when the fund reaches that level, then resumes if an oil-spill response draws it down. 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.
Not only was that proposal not approved, but the one-cent surcharge increase for the spill prevention agency was offset by a one-cent cut in the surcharge for the response fund.
The council planned to discuss at its September board meeting what action, if any, to take in future legislative sessions to secure stable long-term funding for the oil-spill division and inflation proofing for the response fund.