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Palin drops FY10 revenue and spending Amended budget shaves nearly $17 from projected price of oil, reduces spending by $445.5 million, adds oil-related lawsuits Eric Lidji Petroleum News
Gov. Sarah Palin submitted an amended budget to lawmakers on Feb. 18 that reduces both the projected price of Alaska North Slope oil and general fund spending for the year.
The budget covers fiscal year 2010, which begins July 1.
Unveiling her original budget back in December, Palin projected oil prices would average $74.41 a barrel through the year, an estimate some lawmakers considered very optimistic.
With nearly 90 percent of the state’s unrestricted revenue coming from the oil industry, accurately guessing the price of the commodity is central to the budgeting process.
The amended budget predicts oil prices will average $57.78 over the coming fiscal year.
That would bring in around $3.18 billion, down more than $2 billion from fall revenue projections. Palin said the new budget reduces general fund spending by $445.5 million.
The amended operating budget includes a $100 million cut to the oil and gas tax credits given for capital and exploration expenses, down to $200 million from $300 million.
The state has said the reductions don’t indicate a drop in investment, but rather the lag time for receiving and reimbursing requests from companies that don’t yet pay taxes.
Companies that produce oil and gas in Alaska simply deduct the credits from their taxes.
The new budget officially creates a state coordinator position mandated by the Alaska Gasline Inducement Act, and moves several recent funding projects into the new office.
Legal funding added The budget changes also add funding for two legal issues related to the oil industry: $1.9 million for the state to protest “imprudent capital expenditures” on the Strategic Reconfiguration project of the trans-Alaska oil pipeline, and $3.5 million “to continue the pursuit of claims for penalties and lost revenues” against BP Exploration (Alaska) related to the corrosion-related oil spill that shut down operations at Prudhoe Bay in 2006.
The amended capital budget cuts $2 million from a $6 million evaluation of the oil and gas resources on the North Slope. The evaluation is entering its second phase of funding.
The budget cuts $5 million from the AGIA Reimbursement Fund. The new $15 million budget line brings program funding to $45 million, which is “in line with the projection that the costs to get to Open Season by the end of FY10 will not exceed $90.0 million.”
The amended capital budget also cuts spending on the Renewable Energy Grant Fund in half, down to $25 million for the fiscal year. Lawmakers recently approved nearly $100 million in projects from the first round of the fund. (See story page 15)
The amended budget adds $3 million for the Alaska Natural Gas Development Authority Budget’s spur line, now giving $8 million to the public corporation for the project.
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