Alaska voters Tuesday paved the way for a huge oil industry tax cut, unseating four Democratic state senators who helped block a controversial tax reform proposal advanced by Gov. Sean Parnell (R), oil companies and the Alaska business community.

The fate of a fifth Democrat, Sen. Hollis French of Anchorage, was still uncertain yesterday pending a count of the district's absentee ballots. French currently leads Republican Bob Bell by only 250 votes.

At stake is Parnell's proposal to slash the taxes that energy companies must pay when extracting oil from state lands by as much as $2 billion a year. The governor and three of the state's major oil companies -- BP PLC, ConocoPhillips Co. and Exxon Mobil Corp. -- say the cuts are needed to encourage the multinational companies to reinvest in Alaska's oil and gas fields (EnergyWire, Sept. 20).

During this year's legislative session, Parnell's tax reform plan was blocked by the Senate Bipartisan Working Group, a coalition of 10 Democrats and six Republicans who favor less dramatic tax cuts. Coalition members warned that the governor's proposal would reduce the revenues coming into the state, quickly depleting Alaska's budget surplus.

At the time, Alaska's 20-person Senate was equally split between Democratic and Republican members. But with all but one state senator forced to run for re-election because of redistricting, tax reform supporters aggressively campaigned against the coalition members.

The oil companies and the business-oriented Make Alaska Competitive Coalition poured hundreds of thousands of dollars into television and radio ads and a direct-mail campaign urging voters to support tax reform candidates.

The working group members, meanwhile, were backed by state unions and the watchdog group Backbone.

In August, two Republican members targeted by the pro-tax-reform groups lost their primary races to more conservative GOP candidates.

Tuesday's elections left the state Senate firmly in the hands of Republicans, who won at least 13 seats. Now some Republicans who had caucused with the bipartisan group are promising to work with the GOP majority to pass a new tax reform package in the 2013 legislative session.

Bradford Keithley, an Anchorage attorney at Perkins Coie and co-head of the firm's oil and gas practice, said despite the new majority, a new bill faces a tough road because of differences within the Republican majority.

"It's still going to be a difficult session for them to work out the details of a bill," he said. "But I think they're all generally aligned on the objective of getting a bill out that enhances the investment attractiveness of Alaska."

Jim Jansen, co-chairman of the Make Alaska Competitive Coalition, predicted that the new Senate team's top priority will be paving the way for more oil development in Alaska.

"It's always difficult in Alaska to adjust oil taxes," said Jansen, the head of the transportation firm Lynden Inc. "I believe the Senate now understands that we need to make adjustments, and now that the Democrats don't control that coalition, we can get it done."

Alaska voters also approved $453 million in general obligation bonds for port and transportation projects throughout the state.