Oil Production Tax Hits Senate

By Beacon Staff

HELENA – Gov. Brian Schweitzer’s office said Thursday that it is time to repeal tax breaks given the oil industry years ago, a position that reinforces the administration’s support for a second plan to increase collections from oil and natural-gas taxes.

The Schweitzer administration argues that Senate Bill 258 is not really a tax increase — but rather the repeal of a “tax holiday,” a repeal that would kick in only if oil prices exceeded $80 a barrel. In his State of the State speech, Schweitzer had previously advocated a similar House version of a bill that would also increase oil and gas taxes.

“This is not a tax. It is a repeal of a tax break, and in that case only if oil goes above $80 a barrel,” Schweitzer Senior Counselor Eric Stern told the Senate Taxation Committee on Thursday.

The argument could be a tough sell with oil companies, and with the Republicans who are in charge of the Senate.

Committee Chairman Jeff Essman, R-Billings, clearly believed the measure would raise taxes — and he made a sharp reference to past Schweitzer statements opposing tax hikes.

“It just strikes me that a change in tax policy after four years is just like hitting somebody in the back of the head with a Louisville Slugger after they’ve walked in your front door,” Essman said to Stern.

The energy industry lined up to oppose the bill Thursday. Industry representatives said the tax change would hamper production in Montana.

“This bill would reduce jobs and this bill would ultimately lower investment in the state,” said Jon Brumley, president of Encore Energy. “If you change it, you will throw off the equilibrium that has been established.”

Supporters argue the “tax holiday” must now end to help fund education or state government.

Sen. Christine Kaufmann, D-Helena, said no one gets a “a perpetual holiday, an eternal holiday.”

“Without a doubt, these companies can make a lot of money at $80-a-barrel oil,” she said. “And when they get over that, I think the state of Montana deserves to have some of that production.”

A similar plan to increase taxes on oil and gas production, also backed by Schweitzer, is scheduled to be heard by a House panel Friday.

The sponsor of that bill, Rep. Kendall Van Dyk, said he is asking the industry if it prefers his original idea of raising $45 million with a $1-per-barrel tax surcharge, or Kaufmann’s proposal. But he said no one from the oil industry has even approached him.

“When do we reach a point where they are willing to pony up and help out?” Van Dyk said. “I am convinced that the only thing they are interested in is making sure our oil and their money keep leaving the state of Montana.”

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