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Explorers trade tax credits for cash
The State of Alaska paid $193 million in cash over the past year to oil and gas explorers in exchange for tax credits they had accrued for making investments in the state, the Alaska Department of Revenue announced July 10.
The payments are designed to give explorers an incentive to hunt and develop oil and gas deposits in Alaska.
For fiscal year 2009, which ended on June 30, the state distributed the $193 million to 15 “new” oil and gas explorers, the department said.
By new, the state means companies that might be familiar names in Alaska but aren’t yet producing any oil or gas, said state Revenue Commissioner Pat Galvin. He said he couldn’t by law reveal the names of the firms as individual taxpayers.
Galvin said fiscal year 2009 is the first full year the state has reimbursed companies for their credits under ACES — Alaska’s Clear and Equitable Share, the oil production tax reform Gov. Sarah Palin pushed through the Legislature in late 2007.
The credits are essentially advance rebates on future taxes the companies will owe once they begin production. Companies present proof of their spending to the state to build tax credits and swap them for cash.
Priming the pump State officials recognize that a big challenge for oil and gas explorers is the huge expense they must risk upfront before they ever produce the first barrel of oil, Galvin said. By allowing them to cash in tax credits with the state, the belief is it helps encourage exploration and investment.
Galvin said $193 million is an impressive figure.
“The number shows there’s a lot of activity going on out there,” he said.
A Department of Revenue press release said $19 million of last year’s outlay was for credits under the Exploration Incentive Credits program, and $174 million was for capital investment credits under the ACES production tax system.
“In addition, hundreds of millions of dollars in ACES tax credits were taken by companies already producing oil and gas in Alaska who have made new additional investments,” the department said. “These tax credits were used by the companies as offsets to their tax liabilities, and did not require payment from the state.”
—Wesley Loy
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