From Sean Cockerham in Juneau –

Revenue Commissioner Pat Galvin wrote a letter today to legislators interested in lowering oil taxes, telling them oil industry jobs and investment in Alaska are up but drilling activity has been down.

Galvin's letter was a response to questions posed by 15 state representatives in early December. The legislators said they were worried the ACES oil tax system the Legislature put in place in 2007 was “doing more harm than good.”

They wanted statistics on oil and gas activity and employment since the tax passed.

Galvin wrote back today that the state had its highest industry employment in history in 2008, with 12,800 jobs and annual average earnings of $113,541. The 2009 numbers are preliminary, he said, but are expected to be even higher.

He also wrote that industry spending has risen since the Legislature increased oil taxes in 2007. Galvin told the legislators that revenue department forecasts based in company tax information indicate it will keep going up. “Based on a review of taxpayer reports, the growth of overall capital spending is primarily attributable to drilling, seismic and other projects, and not pipeline repairs and other maintenance costs,” Galvin wrote.

Legislators who want to cut oil taxes argue that many of the current oil industry jobs are in temporary maintenance projects to renew aging fields and that with declining production the state will be in trouble once that work is finished.

Galvin also reported that the state approved 175 permits to drill last year, which is the lowest number since at least 2000. It was down from 203 in 2008 but was only slightly less than the 177 permits in 2007. The downward trend of fewer drilling permits started in 2005, Galvin wrote, before the state raised oil taxes.

"It is unclear, however, what specifically may have caused the downturn in permitting. Generally speaking, industry activity is most closely correlated with oil prices, which climbed rather steadily through the period in which permitting declined," Galvin wrote.