JUNEAU, Alaska (AP) — The state has finalized rules to help determine what oil qualifies for special tax breaks under Alaska's new oil tax law.
The law championed by Gov. Sean Parnell and passed by the Legislature earlier this year is aimed at spurring more production. Alaska relies heavily on oil revenues to run state government, but oil production has long been on a downward trend.
The law, much of which takes effect Jan. 1, sets a base tax rate of 35 percent and provides a capped, per-barrel credit that the Parnell administration expects will apply to the vast majority of the legacy fields.
It also provides more generous tax breaks for so-called "new" oil. How best to define new oil was a sticking point during the legislative session. Metering would be used to calculate one of the most contentious types of oil that qualifies for tax breaks: oil coming from acreage that's added to existing producing reservoirs.
Companies seeking a tax break for this type of oil would be responsible for the metering. Mike Pawlowski, oil and gas program director for the state Revenue Department, said Monday that metering is a "very objective standard" that also provides transparency and predictability for the companies and the public. An earlier proposal also would have allowed companies to use an alternative methodology, but he said that left more discretion up to the department to decide what qualifies.
Separate meters would not be required for each well. Audit master John Larsen said the state would prefer companies aggregate wells from the expanded acreage and run them through a single meter for efficiency's sake.
Rep. Beth Kerttula, D-Juneau, worries the regulations could create a loophole that could allow oil from existing pools to get a better tax rate.