Revenue officials explain tax credit issue flagged by gov
JUNEAU — State Revenue department officials told lawmakers Jan. 26 that the tax credits that were a source of contention in an opinion piece by Gov. Bill Walker are being paid primarily to small explorers or those developing new oil and gas fields in Alaska.
Walker in January said the state stood to pay out about $100 million more in oil and gas production credits than it takes in production taxes this year and about $400 million more next year. He referenced the 2013 rewrite of Alaska’s oil tax law, saying the overhaul occurred with little consideration given to low prices. Giving away more in tax breaks than the state collects is irresponsible and unsustainable, Walker said.
The department, in its fall revenue forecast, projected that the state would pay $625 million in so-called refundable credits. Revenue Commissioner Randall Hoffbeck told the Senate Finance Committee these are credits primarily to explorers or developers that have no tax liability. He said the credits are split pretty evenly between activity on the North Slope and in Cook Inlet.
The North Slope’s major players are not part of the group that would benefit from this category of credits, and they are paying taxes, Hoffbeck said. But production taxes amid low oil prices are forecast to total about $524 million this year, down from about $2.6 billion last fiscal year, according to the department.
Committee co-chair Anna MacKinnon, R-Eagle River, said the opinion piece seemed to leave the impression that the problem was with the North Slope’s big three companies.
Walker’s spokeswoman has said the governor was sharing facts with Alaskans as he and the administration were learning them and that the piece was not a precursor to any legislation. Walker took office in December.
Hoffbeck said there is no systemic problem with the credits themselves. He said this is a cash-flow issue, driven by low prices.
“Investments in the future, when you don’t have much revenue, are painful. But they’re still investments in the future,” Hoffbeck said.
Hess Corp. plans 18 percent cut in Bakken spending this year
BISMARCK, N.D. (AP) — Oil and gas producer Hess Corp., a major operator in the North Dakota oil patch, plans to reduce spending in the region by over 18 percent this year — in part due to a steep drop in oil prices.
Hess announced this week that it plans to spend $1.8 billion in the Bakken, down from $2.2 billion in 2014. Hess President and Chief Operating Officer Greg Hill said the company will also have fewer drilling rigs and will complete fewer operating wells.
John Roper, a spokesman for Hess, said while the declining price of oil has played a role in the company’s decision, part of the changes in the Bakken are due to new technology. Roper said due to efficiencies and improvements in drilling, Hess expects to drill almost as many wells this year while running only half the drilling rigs.
Hill said Hess feels confident its leases in the Bakken can be productive and profitable in 2015.
“Hess has some of the best acreage in the Bakken, and we will continue to drill in the core of the play which offers the most attractive returns,” he said. “As oil prices recover we will increase activity and production accordingly.”
Several months ago, crude oil was more than $100 a barrel. It’s now trading below $50 a barrel.
North Dakota’s rig count was 154 as of Tuesday, down 30 from mid-December, the Bismarck Tribune reported. The price of Bakken crude was posted at $28.75 a barrel.
Hess reported a fourth-quarter loss of $8 million on Wednesday, after reporting a profit in the same period a year earlier.
BP to sell part of its Gulf of Mexico stake to Chevron, orders pay freeze for 2015
NEW YORK (AP) — BP is selling part of its stake in an emerging oil-producing region in the Gulf of Mexico to Chevron, and the two companies, along with Conoco Phillips, will work to develop the fields together.
Terms of the deal were not disclosed. The joint-development agreement is a way for the companies to try to reduce the cost and risk of exploring and developing large, complex fields in the Gulf’s deep waters at a time of low oil prices.
For BP, it allows the company to move some of its recent discoveries closer to production as it continues to work to settle claims resulting from its 2010 oil spill in the Gulf.
Under the deal, which spans 24 jointly-held offshore leases, Chevron will replace BP as project operator.
BP also says it will freeze pay for most of its employees in 2015 as oil companies look for ways to cut costs amid falling oil prices.
Prices have fallen by nearly half in just six months, with major benchmarks trading below $50 a barrel.
The Houston Chronicle reported that the announcement was made Jan. 26 in an internal message.
BP spokesman Brett Clanton said in a statement Jan. 26 that it was a “prudent response” to a challenging market environment.
The newspaper reported that BP said in December it expected to take a $1 billion restructuring charge this year because of job cuts and pared back oil production.
According to its last annual report, BP employs 83,900 workers, including about 20,000 in the U.S.
Montana oil spill estimate lowered to 30,000 gallons
BILLINGS, Mont. (AP) — Authorities have lowered their estimate of how much oil spilled from a broken pipeline beneath the Yellowstone River in eastern Montana, briefly contaminating the water supply of a city downstream.
U.S. Environmental Protection Agency spokeswoman Wendy Thomi said Monday that Bridger Pipeline Co. recovered about 20,000 gallons of crude from its pipeline. That’s 10,000 gallons more than originally reported, meaning 30,000 gallons went into the river Jan. 17.
Thomi says the Wyoming company has finished drawing oil from the line, but very little crude has been recovered from the river, where ice has slowed cleanup efforts.
The accident temporarily prevented 6,000 people in Glendive from drinking their tap water after traces of oil were found in a water treatment plant.
Health officials are monitoring the supply, and no further contamination has been detected.