Ala. Lawmakers Kill Natural Gas Tax Hike

The House Government Appropriations Committee voted 4-11 for the bill. The defeat occurred when most of the Republicans on the committee joined Democrats in voting against the Republican governor's tax bill.

"Rather than vote to fund vital services, these committee members chose to line the pockets of big oil companies," Riley said.

Dean Peeler, executive director of the Alabama Petroleum Council, said the committee recognized the bill would have discouraged the oil industry from further investment in Alabama.

"You don't want to make the highest taxed state twice as high as it is now," he said.

The bill would have changed the state severance tax on natural gas wells along the coast from a value-based tax to a volume-based tax, and it would have raised the amount oil companies pay annually from $40 million to $80 million.

Most of the increase would have fallen on Exxon Mobil, which paid three-fourths of the taxes collected from coastal wells last year.

Rep. John Knight, the bill's sponsor and the committee chairman, said the General Fund budget "is in trouble" for the next fiscal year after the loss of the $40 million in new tax revenue, and he will try to come up with another way to generate money.

Knight, D-Montgomery, has not yet asked his committee to vote on that budget, which finances the non-education functions of government.

Riley suggested the outcome of his bill was the result of issues beyond the proper tax rate on natural gas wells.