|
Revenue responds to ACES tax concerns
Alan Bailey Petroleum News
Both oil industry investment and employment have increased since the introduction of both the state’s ACES production tax and the preceding form of the tax, known as PPT, said Alaska Commissioner of Revenue Patrick Galvin in a letter dated Jan. 21 to several members of the Alaska Legislature. Galvin was responding to a Dec. 4 letter from the lawmakers to Gov. Parnell, expressing concern about evidence of a decline in Alaska oil industry activity and questioning whether excessive taxation of the industry was causing that decline.
“However, the data also reveals that the period from 2005 to the present experienced less drilling activity than the previous five-year period,” Galvin said.
PPT was enacted in 2006 and ACES in 2007.
It is also important to recognize that an evaluation of Alaska’s appeal as a target for oil and gas investment cannot be limited to just the fiscal system, Galvin said. Other factors impacting investment decisions include the state’s geology, infrastructure, support service costs, the regulatory environment and global economic considerations, he said.
Response to questions In response to a series of questions posed by the legislators in their December letter, staff from the departments of Revenue, Natural Resources and Labor and Workforce Development and the Alaska Oil and Gas Conservation Commission prepared a series of tables and graphs showing leasing activity, employment levels and drilling activity over the past few years.
In summary, the staff concluded that:
• There has been no clear trend in leasing activity in recent years.
• Oil industry employment has reached peak levels in the past couple of years.
• A slight downturn in the number of wells permitted, and in the number of wells completed, occurred prior to the enactment of the new taxes, although the count of active drilling rigs fluctuated quite a bit during the same period.
• The permitting of exploration wells shows no obvious trend in relation to the enactment of the new taxes.
• Oil industry capital and revenue expenditures have both increased steadily since the new taxes came into operation.
• A big run-up in applications for exploration credits in 2008 may have related to especially high oil prices in that year, with credit applications dropping in 2009 as oil prices fell.
No pipeline shutdown Claims that the trans-Alaska oil pipeline may have to shut down as early as 2018 are “without technical merit” and, based on “more reasonable estimates,” operation of the pipeline is likely to continue beyond the 2040s, the staff said.
And the staff commented on the state administration’s recent proposals for changes to the ACES exploration credit program. Those proposals consist of an extension of the 30 percent capital credit to all well-related activity, improved access to capital credits for new explorers, accelerated usage of capital credits and the waiving of interest on taxes overdue because of ACES regulation changes.
| 