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Providing coverage of Alaska and northern Canada's oil and gas industry
October 2008

Vol. 13, No. 43 Week of October 26, 2008

Petroleum News: Clarification on proposed tax for some of Alaska’s natural gas reserves

An article from the Oct. 5, 2008, issue of Petroleum News titled “Lawmakers revive reserves tax as proposed ballot initiative after measure failed in 2006” (www.petroleumnews.com/pnarchpop/081005-04.html) reported on a proposed ballot measure to tax natural gas reserves on the North Slope.

The proposed ballot measure follows a similar bill voted down in 2006.

In response to a request for the new 2008 measure, the state accidentally furnished Petroleum News with a copy of the failed 2006 measure. Although the two bills are similar, the sponsors made several changes before reintroducing the proposed ballot measure this year.

The story reported, “The proposed measure would apply to conventional reserves in state units created since 2002 and known to contain at least 1 trillion cubic feet of known natural gas reserves.” However, those criteria come from the failed 2006 ballot measure.

In the updated proposal filed in late September 2008, the sponsors changed the requirement to cover conventional reserves in state units in “continual existence” since 1990 and known to contain at least 1 trillion cubic feet of known natural gas reserves.

The new measure also does not apply to gas “first discovered after December 31, 2005.”

The sponsors of the bill say the changes were designed to keep the tax from applying to any new discoveries and to future production from the Point Thomson unit, which is currently under litigation after the state moved to terminate the leases earlier in the year.

The new measure also gives lessees longer to use gas for field development without facing the reserves tax, sets out guidelines for how the state should measure reserves and changes the criteria for repealing the tax with construction of a gas pipeline.

The article correctly reported, “The new measure would allow leaseholders to reclaim the entire tax through annual credits. The previous measure included a similar provision, but stopped reimbursing companies after 2030. The newly proposed measure contains no such deadline.”

Petroleum News regrets the errors.






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