Parnell submits opening proposal on oil taxes for special session
With the special session of the state Legislature under way at 1 p,m. Wednesday, Gov. Sean Parnell transmitted legislation to change Alaska's oil tax regime to foster new production and encourage further development of current sources to stem the decline in North Slope production.
Parnell issued the call for a special session just as the regular session of the Legislature ended at midnight, April 15. Lawmakers have been waiting, however, to see just what Parnelll would propose for oil tax changes.
The Legislature convened in a special session to address oil taxes, an Alaska gasline, and human trafficking legislation.
In a statement, Parnell said, “Alaskans are well aware that oil production is declining from our legacy fields. The cost of maintaining a declining field goes up year after year, and higher cost barrels of oil get left in the ground if they are not economic to produce. That is the risk: Without meaningful tax change for legacy fields as well as new fields, a larger percentage of Alaskans’ resources will remain locked in the ground.”
“We can avoid this risk and ensure a more prosperous future for Alaskans if we are willing to continue working to increase oil production in all of Alaska’s fields.”
For new North Slope fields, Parnell’s bill incentivizes new oil and gas production by providing a 30 percent exclusion, based on gross value at the point of production, from the production tax value used to calculate the base rate and the progressivity tax for the first 10 years of sustained production from new fields.
For currently producing North Slope fields, the bill establishes an exclusion of 40 percent of gross value at the point of production from the monthly production tax value used to calculate the progressivity tax.
The bill caps progressivity by establishing a 60 percent maximum rate. Finally, the bill would extend tax incentives for well lease expenditures available elsewhere in the state through AS 43.55.023(l) to North Slope activities and would allow producers to apply tax credits in one year.
These changes are designed both to encourage development of new, currently undeveloped leases or properties, and from known fields in the state, Parnell said in the statement.