|
Weeks wants indie credit extended Asks Parnell to remove 2016 sunset provision on the Small Producer Tax Credit; credit pays for fields smaller than 50,000 bpd Eric Lidji For Petroleum News
A tiny North Slope explorer is asking the State of Alaska to extend a tax credit for small producers.
UltraStar Exploration Managing Member Jim Weeks sent a letter to Gov. Sean Parnell on Jan. 28 asking him to indefinitely extend the Small Producer Tax Credit. Parnell recently proposed a several revisions to the state fiscal regime for exploration and production.
The Small Producer Credit pays up to $12 million per year to companies that produce less than 50,000 barrels of oil equivalent per day (and an increasingly smaller credit for companies that produce between 50,000 and 100,000 barrels of oil equivalent per day).
The credit is set to expire in 2016 (although if a company brings a field online between 2006 and 2016, then the credit lasts for nine years from the start of production).
Weeks believes it should be extended indefinitely.
“Rather than have a specific year when the Small Producer Credit expires, I recommend that it stay in place for each reservoir or unit until payout of the exploration, delineation and development costs necessary to get the oil flowing,” Weeks wrote.
Because of the long lead time needed to develop reserves on the North Slope, Weeks hypothesized that companies likely wouldn’t get to claim the credit on any production from leases acquired last year. He noted that it took UltraStar, the smallest explorer on the North Slope, six year per well to drill. UltraStar may never get to claim the credit.
Credit dates to Murkowski The Murkowski administration created the Small Producer Credit in 2006 with the Petroleum Profits Tax, an overhaul of the fiscal regime. The Palin administration kept the credit when it revised the tax code in 2007 under Alaska’s Clear and Equitable Share.
The Parnell revisions are popular among independents. A group of six smaller explorers issued a statement saying the bill “addresses the fundamental concerns of all companies that would like to explore for and develop reserves on the North Slope.”
The companies are Armstrong Oil and Gas (through its subsidiary 70 & 148), Brooks Range Petroleum Corp. (the operating arm of the Alaska Venture Capital Group), GMT Exploration, Great Bear Petroleum, Savant Alaska and Renaissance Alaska.
UltraStar Petroleum is exploring the Dewline unit north of Prudhoe Bay and south of Northstar. The company drilled the Dewline No. 1 well in early 2009 and is preparing to drill a follow-up well and sidetrack in the winter of 2011 and 2012.
Winstar Petroleum, a sister company to UltraStar run by all the same players, drilled Oliktok Point State No. 1 in 2003, but that well ultimately proved to be a dry hole.
The Parnell bill would lower the tax rate at new fields, cap production taxes and extend some Cook Inlet tax credits to the North Slope, among other proposed revisions.
| 