JUNEAU, Alaska (AP) — The Parnell administration remains concerned that the current proposal to overhaul Alaska's oil tax system will leave the state too vulnerable at low prices, a deputy Natural Resources commissioner said Tuesday.
Asked if the administration supports the latest version of SB21, Joe Balash said he wouldn't go that far yet, but he said "indications are positive."
The proposal, like the version that passed the Senate last month, would fix the base tax rate at 35 percent and provide a $5-per-barrel credit for oil produced. But under the version being considered by the House Resources Committee, that credit would only apply to what would be considered new oil and production that also would qualify for a 20 percent tax break, known as a gross value reduction.
Areas that don't qualify for the gross value reduction — likely the "vast majority" of the legacy fields, Balash said — would have a 35 percent base tax rate and a per-barrel allowance on a sliding scale. The allowance would be as high as $8 a barrel at oil prices less than about $90, according to one calculation, and down to nothing at higher prices, around $160 or above.
In presentations to the committee, consultants said that under the plan, the effective tax rate on oil at $60 a barrel would be zero.
Gov. Sean Parnell proposed an oil tax overhaul as a way to boost investment and production. One of the tenets of the original SB21 was to provide "more downside price protection for Alaskans in exchange for more upside price revenue to the companies," according to Parnell's office.
House Resources co-chair Eric Feige has said that having a "slightly lower" level of government take at lower oil prices "should greatly enhance" project economics for companies. But he said there's a sense that the state "should have a little bit more of a bite" at higher prices.
An analysis of the bill, based on the last forecast for oil prices and production, said the state could lose up to $4.8 billion under the plan through 2019. That fiscal impact — a mix of impacts on revenue and the state operating budget — is based on a forecast that assumes continued production declines and oil prices of between $109 a barrel and $118 a barrel through 2019. The hit is about $1 billion less, on the high end, than the bill that passed the Senate. An updated revenue forecast is expected within days.
The analysis is billed as something of a worst-case scenario that doesn't account for possible increases in production that might result from the plan.
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