HOME PAGE SUBSCRIPTIONS, Print Editions, Newsletter PRODUCTS READ THE PETROLEUM NEWS ARCHIVE! ADVERTISING INFORMATION EVENTS PETROLEUM NEWS BAKKEN MINING NEWS

Providing coverage of Alaska and northern Canada's oil and gas industry
February 2010

Vol. 15, No. 9 Week of February 21, 2010

Tax holiday for new oil floated in House

Senate Finance hearing reviews ACES impact; Labor Department data shows recent drop in employment, more nonresident workers

Kristen Nelson

Petroleum News

The Alaska Legislature is focusing a fair amount of attention on oil taxation, with companion bills being heard in the House and Senate which would offer incentives for hiring Alaskans and also reduce the tax rate established in the 2007 production tax bill, Alaska’s Clear and Equitable Share, known as ACES.

Other production tax bills have been introduced. The most recent, by Rep. Mike Kelly, R-Fairbanks, would offer tax credits for new oil going into the trans-Alaska oil pipeline.

Senate Finance has embarked on an extensive review of the impact of ACES, with a presentation from the Alaska Department of Labor and Workforce Development providing numbers for employment in the sector — projected to drop by 3 percent this year — as well as the percentage of resident and nonresident workers in the industry.

Tax credit for new oil

Kelly’s bill, House Bill 351, is aimed at increasing throughput in the trans-Alaska oil pipeline.

In a Feb. 15 House Majority press availability Kelly called it an aggressive tax bill with a relatively modest risk.

He said in a statement that the bill retains the current 25 percent severance tax, including the current progressivity rate, for the easier oil which has been discovered and is under development and production.

For the first 10 years that it flows through the line, new oil producers pay only royalties — and whatever local property taxes and income taxes apply — but no production tax.

Kelly said the tax break, along with oil exploration credits already available, should take off the table the argument that high taxes are shutting down drilling.

“The beauty of this bill is that it should give oil companies exactly what they need for new oil, while avoiding a shock to state revenue by cutting tax on all oil,” Kelly said in a statement.

Unemployment claims up

Senate Finance Co-Chair Bert Stedman, R-Sitka, has the committee working through a series of presentations designed to identify production tax impact.

On Feb. 16 the committee heard from the Department of Labor and Workforce Development on oil industry employment, unemployment and resident hire.

Unemployment claims in the oil and gas industry rose sharply last year and the department is projecting a 3 percent decline in sector jobs this year.

Jeff Hadland, a department economist and the research program supervisor for Labor’s Research and Analysis Section, told the committee that while 2009 oil and gas employment in the state was slightly higher than 2008 levels, the last half of the year showed a decline, a trend which is projected to continue this year.

Major oil and gas company employment was stable over the year, he said, but unemployment in service and supply companies was dragging down the numbers.

“So in terms of a forecast, we’re looking at from 2009 to 2010 a 0.4 percent decline in jobs overall … and a 3 percent decline in oil industry employment from 2009 to 2010.”

Nonresident numbers up

The other number that is down is the percent of resident workers in the oil and gas industry — a chart from the department showed a drop from some 83 percent resident workers in the oil and gas industry in 1988 to 70 percent in 2008.

In recent years the percent of resident workers peaked in 2002 at about 74 percent, and has dropped since.

“A lot of that is in conjunction with the increased reliance on oilfield service companies to do a lot of work,” Hadland said. “The major oil company resident hire statistics have been fairly stable but the oilfield service sector tends to be a little bit higher, something more comparable to the construction industry in terms of their resident-hire performance,” so as the number of workers in the oilfield service sector of the industry as increased, so has the nonresident hire percentage.

The number of unemployment insurance claimants for all oil and gas industry related employment bottomed out in 2006 at 906. The chart Hadland showed the committee covered 2003 through 2009. In 2003 there were 2,827 individuals from oil and gas related industries claiming unemployment insurance (a footnote indicates that individuals are only counted once in a year), a number which dropped off steadily to 2006 and then began to rise again: 1,084 in 2007, 1,362 in 2008 and more than doubled to 2,844 in 2009.

For all industries the number of unemployment insurance claimants for 2003-09 bottomed out in 2008 and rose by just 40 percent in 2009, from 45,343 to 63,630.






Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] --- http://www.petroleumnews.com ---
S U B S C R I B E

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2013 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.