Palin urges repeal of oil tax system; Revenue sees logistical challenges if referendum passes

Keeping Alaska's new oil tax structure in place would be a "devastating step backwards" in the state's development, Gov. Sarah Palin said.

Palin made the remarks in a roughly 18-minute video posted online, just over two weeks before voters will decide whether to repeal the system.

Palin said she will vote to repeal. She said lawmakers "caved" to Big Oil interests in passing the current tax structure in 2013 and she considers the system put in place in 2007 when she was governor fairer and mutually beneficial to the state and companies. Alaska would revert to that system, known as Alaska's Clear and Equitable Share, if the repeal effort is successful.

If the law is repealed, making the switch back to ACES could be a logistical challenge for the Department of Revenue. The Aug. 19 referendum, if successful, would take effect 30 days after the election is certified.

"It's going to be a heavy lift," Revenue Commissioner Angela Rodell said.

The department has estimated it would need to hire contract auditors at a cost of about $400,000 and that reconfiguring its systems could cost between $1 million and $2 million. The department is in the midst of reprogramming its systems to fall in line with the new tax law, the major provisions of which took effect Jan. 1. That process currently is set for completion by year's end to coincide with end-of-year reporting by the companies, Rodell said.

The department would need to request funding for new auditors as part of a supplemental budget request early next year, she said. While the department might be able to move some money around, Rodell said agency budgets across the board are tight and she would likely have to wait until lawmakers approve the money to make additional hires.

Another concern, she said, is that a change midstream in tax systems could give rise to a large number of appeals, such as companies protesting their rate of taxation or eligibility for certain credits or expenses.

"It's not as straightforward as everyone would like, including me," she said.

If the referendum is successful, additional changes are expected. Even the most ardent supporters of ACES, mainly legislative Democrats, see room for improvements. Critics of ACES said it took too much money at higher oil prices, discouraging investment.

Sen. Bill Wielechowski, D-Anchorage, said he doesn't see why going back to the ACES system would be a problem for Revenue. He said he would hope the administration had planned for the possibility that the referendum would pass in gearing up.

If the referendum — which he supports — passes, he said it should send a message to lawmakers to come up with a bipartisan plan that has strong buy-in among lawmakers.

If it fails, he said he and others will be watching to see if the current tax structure delivers on the expectation or promises of more jobs and increased production and state revenues.