Parnell proposes changes to ACES credits

Alaska Gov. Sean Parnell announced Jan. 14 that his administration is proposing some changes to the tax credit rules within the state’s ACES oil production tax to increase incentives for firms to invest in Alaska oil exploration and development. Parnell does not propose any changes to the ACES tax rates.

The specific changes that the administration will ask the Legislature to enact are:

• To make available to in-field, well-related activity, such as infill drilling, the 30 percent tax credit currently only available to drilling activities more than three miles from existing wells.

• To enable companies to use all of their capital credits in the year that the credits are earned, rather than having to defer the use of at least half of the credits into the following year.

• To enable new explorers to claim tax credits for exploration costs without having to make subsequent investments equal to the value of the credits.

• To waive state claims for interest on additional taxes that a company might have to pay in arrears, as a consequence of the retroactive application of ACES tax regulations that the state is currently finalizing.

Parnell said there is significant evidence that the tax credits in ACES are encouraging companies to explore in Alaska and that the administration’s proposed changes to the tax would bolster that effect, with the main goal being the creation of more jobs for Alaskans in the near future.

On the other hand, the administration’s discussions with oil companies failed to discover any evidence that the lowering of the progressive tax rates in ACES would result in new investments in Alaska, regardless of claims that lower rates would make Alaska more competitive for those investments, Parnell said.

“At this moment I am working for providing more opportunity for Alaskans in jobs,” Parnell said. “I’m not interested in changing progressivity so they (the companies) can take that money and invest it somewhere else. If they’re willing to invest it here, I’m open to considering it, but I’m standing up for Alaskans in this, not some other country.”

—Alan Bailey