SB 21 is a colossal failure, Stedman said in an interview. It leaves the state extremely exposed on the downside with no ability to make it up on the upside.

The oil industry, he added, cant afford tax increases, and we cant afford to pay them. So we need to sit down and work this out.

The states preliminary spring revenue forecast, released Monday, says Alaska will bring in $690 million in unrestricted petroleum revenue next year, compared to $825 million in cash tax credit payments for oil companies.

Those payments to oil companies include an extra $200 million deferred when Gov. Bill Walker used his line-item veto in last years budget. The payments dont, however, include another $150 million in non-cash credits that companies can deduct from their projected tax liability.

The forecasts release came as the House Resources Committee, controlled by the Republican-led majority caucus, advanced legislation from Walker to increase oil taxes and scale back the cash subsidies. But that was only after committee members sharply reduced the impact of the legislation, House Bill 247.

The new version saves the state no more than $200 million over the next three years, compared to about $1.2 billion under Walkers original proposal.

The committee, in a meeting that lasted until after 10 p.m. Tuesday, rejected more than three dozen amendments from Democrats and from Homer Rep. Paul Seaton, a moderate coastal Republican who, like Stedman, is not in his chambers leadership.

Some of the amendments to the bill would have restored savings sought by Walker; others would have gone further.

Walkers original proposal would have cut about $400 million from next years credit payments and raised about $100 million from the big North Slope producers by increasing their minimum tax and limiting the use of other credits.

We want to cut the budget, and this is really the biggest section of cuts that have been proposed. And we reduced those cuts by 90 percent, Seaton said in an interview the day after the hearing, referring to the difference between the proposals from Walker and the resources committee.

One of the GOP leaders on the resources committee, Anchorage Rep. Craig Johnson, said the new version of the bill still closes some loopholes that could otherwise give individual companies huge tax deductions for new oil development.

We did some of that while protecting our long-term investment and being able to get the oil out of the ground in the future, Johnson said. The policy is: We need a healthy industry. And I think the bill we put forward keeps us having a healthy industry while taking away some of the problems that weve got with the big fields and potential billion dollars in credits.

In the near term, however, the bill advanced by the committee wont do much to reduce the states cash payments to oil companies  the third-largest line item in the state budget, behind the health and education departments. The payments go primarily to small companies on the North Slope and in Cook Inlet, not big North Slope producers ConocoPhillips, BP, and ExxonMobil.

The states industry trade groups have fought any reductions to the credit program, arguing that low oil prices are already causing companies to lose money. BP, for example, reported a $194 million loss for its Alaska operations in 2015.

Should the oil industry remain a vital part of Alaska's economy, or should the government use it as a slush fund to balance their checkbook? asked a newsletter published Thursday by the Support Industry Alliance, which represents businesses that work in oil and gas and mining.

Both the alliance and the Alaska Oil and Gas Association, which represents the states oil producers, question the states tax-credit projections for next year.

Kara Moriarty, AOGAs president, said in a phone interview that the $825 million credits forecast feels high, though she added that she couldnt explain why because individual oil companies dont share their data with her.

Walker, in an interview, called the tax credit projections unprecedented and unsustainable, and he added that they underscore the need for lawmakers to pass his overhaul of the Permanent Fund, which would reduce the state budgets reliance on volatile oil prices.

But beyond the proposals he laid out in his initial bill, Walker stopped short of calling for broader changes to SB 21, which was upheld in a public vote in 2014 after narrowly passing the House and Senate the year before.

Stedman, however, did not hold back in his criticism.

The Sitka senator owns an investment management firm and maintains his own six-page spreadsheet to predict state oil revenue; he also tracks legislative issues using a framed print depicting the Battle of Little Bighorn.

On that print, a label for the states previous revenue forecast, which predicted $56-a-barrel oil next year, sits below the lifeless body of one of Gen. George Custers troops. (This weeks new forecast dropped that prediction to $39.)

Stedman called SB 21 appalling and intolerable, with negligible revenue at low oil prices  a problem, Stedman added, that he and others pointed out in committee hearings on the bill, but were ignored.

The low revenue numbers, he said, will likely persist even after prices rebound, thanks to carry-forward credits that won't be used until oil companies rack up larger tax bills to apply them to. The Walker administration predicts those credits will add up to $600 million by the end of next year  which will be deducted from companies production taxes at some point in the future.

Under the new revenue forecast, the state isnt projecting significant production tax revenue until 2022. Production tax revenue is forecast to be less than $33 million each year until then.

Stedman predicted that SB 21 would ultimately be changed once his colleagues recognize what he sees as its flaws.

Its pretty clear that a lot of legislators, including myself, dont even understand it. Im still learning stuff every day. So we need to have it simplified and transparent, he said.

Stedman, however, is not part of the Senates leadership, and many of his Republican colleagues in both chambers have resisted substantial changes to the current tax structure.

Sen. Cathy Giessel, R-Anchorage and an oil industry ally, led a tax credits working group last fall that made an identical recommendation to the proposal in Walkers bill to limit the use of certain credits on the North Slope  a provision that would raise about $50 million.

But the group made no other specific recommendations to reduce the states annual tax credit bill, which has now soared to more than $600 million, not including the $200 million in last years deferred credits.

In an interview, Giessel acknowledged that lawmakers had worked hastily when they unanimously passed the 2010 legislation broadening tax credits for Cook Inlet  estimated at $400 million in the last fiscal year  in an attempt to head off a shortfall in natural gas supplies used for electricity generation and home heating in Southcentral Alaska.

But she said that undoing the system just as quickly would do damage. Thats why the House Resources Committees version of the tax credits legislation would create another working group, focusing on Cook Inlet, to study the credits in time to make recommendations for a new regime during next years legislative session, she said.

I think its moving as fast as it can without decimating Alaska families, Alaska businesses and Alaska jobs, Giessel said. Its got to be deliberate. Its got to be carefully thought out.

Others see changes as overdue. Brad Keithley, an oil and gas consultant and budget hawk, said that the Cook Inlet tax credits dont generate nearly enough of a return on investment for the state, since the current regime allows companies there to pay no production taxes on oil and minimal taxes on gas.

Lawmakers are defending that system because its their baby, he added.

Its their program. They believe theyre doing good by supporting the industry, Keithley said. But we cant afford it.