JUNEAU, Alaska (AP) — Independent oil companies offered a mixed assessment Monday of Gov. Sean Parnell's proposed oil tax overhaul, saying it is a good start but needs additional work.
Both the House and Senate resources committees took testimony from several of the smaller companies that are either exploring for or producing oil on Alaska's North Slope.
Pioneer Natural Resources Alaska, Brooks Range Petroleum, and Armstrong Oil and Gas said there were positive aspects to Parnell's plan, including a tax break for new oil and the elimination of a progressive surcharge. But they raised concerns, including how his proposal deals with tax credits.
The chief operating officer for Brooks Range, Bart Armfield, said in his presentation that tax credits have helped to keep his company "in the game." To get to first oil on its Mustang development under the governor's plan, the company would need an extra $123 million in funding than originally planned.
The idea, when the current tax structure was passed, was that the state would help oil companies on the front end with things such as tax credits, and share profits on the back end when oil flowed and prices were high. The system features a 25 percent base tax rate and a progressive surcharge triggered when a company's production tax value hits $30 a barrel.
Companies have said the surcharge eats too deeply into their profits and is a disincentive to new investment. Parnell's revenue commissioner has said he's seen no evidence that tax credits, which could top $1 billion next fiscal year, have led to increased production.
Parnell's proposal would keep the 25 percent base tax rate and scrap the progressive surcharge, to the delight of industry. It includes a tax break for oil from new fields, including new areas of the legacy fields. It would keep in place credits for exploration but eliminate credits for qualified capital expenditures on the North Slope. It gears other credits toward production of new oil.
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