In 2007 capital investments totaled $1.578 billion and operating expenses totaled $2.081 billion, the revenue department said.

Production is expected to decline in 2009 to an average rate of 689,000 barrels per day, down from an average rate of 720,000 barrels per day in 2008.

The increased costs, spread over declining production, will increase total per-barrel cost to $18.59 per barrel in 2009, up from $16.23 per barrel in 2008 and $13.55 per barrel in 2007, the department said.

Total costs include operations and capital costs for investments on the producing lease.

Per-barrel operating costs were $7.71 per barrel in 2007 and are estimated at $8.15 per barrel in 2008 and $8.88 per barrel in 2009. Per-barrel capital costs were $5.84 per barrel in 2007 and are estimated at $8.08 per barrel in 2008 and $9.72 per barrel in 2009.

Figures for 2007 are actual costs submitted in industry taxpayer returns filed with the Department of Revenue, acting chief economist Cherie Nienhuis said.

Estimates for 2008 and 2009 are also derived from information submitted with industry tax returns. Along with actual costs for the tax return being submitted, companies are also required to estimate future costs based the best information available, Nienhuis said.

In a related development, the state has also set aside an additional $325 million to pay for higher-than-expected claims for oil and gas development and exploration tax credits. The additional funds were added to a state capital appropriations bill approved by the Legislature.

State Revenue Commissioner Pat Galvin told legislators that applications for the tax credits, which are paid in cash by the state, are higher than what was forecast, an indication of expanding development and exploration in the state.

A total of $250 million is now set aside for the tax credits for the current state fiscal year, up from $150 million estimated earlier, and $400 million is set aside for the next fiscal year beginning July 1, revenue department spokesman Jerry Burnett said.

State officials had to revise their estimates for the tax credits when applications were filed April 1, Galvin said.

The commissioner also told the legislators that two medium-fixed new offshore development projects - the new Oooguruk field being developed by Pioneer Natural Resources Co. and the Nikaitchuk project being constructed by Eni Oil and Gas Inc. - will consume a big part of the money available for tax credits this year.