(Corrects ninth paragraph to reflect two Republican senatorsvoted against bill.)
By Yereth Rosen
ANCHORAGE, Alaska, March 20 (Reuters) - Alaska statesenators approved a deep cut to oil taxes late on Wednesday,arguing that drastic measures were needed to boost sagging oilproduction, even if opponents say the cuts could cost the state$1 billion a year in lost revenue.
The bill passed by the narrowest possible margin, 11-9,mostly along party lines, with Republicans in favor andDemocrats opposed.
"It was an oil-wealth giveaway of epic proportions," stateSenate Minority Leader Johnny Ellis said at a news conference.
The bill eliminates an escalator that hikes production taxesas oil prices rise.
The current system sets a base rate of 25 percent for every$30 per barrel of net profits, but the escalator -- 0.4percentage points for every $1 per barrel above $30 - pushes therate far higher when oil prices are high.
While the bill needs approval from the Republican-controlledAlaska House of Representatives, Governor Sean Parnell, whointroduced it, issued a celebratory statement. "Today, theSenate took bold action to increase production and fill thepipeline," he said.
The high marginal tax rate is causing the oil industry toflee for more lucrative opportunities in North Dakota, Texas andCalifornia, said state Senator Cathy Giessel, an AnchorageRepublican, as she reminisced about the oil-boom days.
"I'm interested in seeing that robust economy come back,"Giessel argued in floor debate. "This is about the progress ofAlaska, our private-sector economy and its potential growth.
But Senator Gary Stevens, one of only two Republicansenators to oppose the bill, cited the Exxon Valdez oil spilland other cases of oil-industry scandal and incidents when theindustry "cheated" Alaskans.
"This body has decided to place enormous trust in anindustry that has often proved itself to be untrustworthy," hesaid in floor debate.
The bill, if approved by the House, would establish a simple35 percent tax rate, with $5 per barrel exempted for allproduced oil.
It largely upends a tax system called "Alaska's Clear andEquitable Share," or ACES, that was considered the mainlegislative accomplishment of Parnell's predecessor, SarahPalin. The one-time Republican vice presidential candidate didnot weigh in on this year's tax debate. (Writing by Braden Reddall; Editing by David Cowell and GeraldE. McCormick)
