When state lawmakers resume discussions of oil and gas policy this winter, they’ll have one tool they didn’t have last year — a suite of reports by global oil expert Pedro van Meurs.
Van Meurs, who advised former Gov. Frank Murkowski, is compiling six hefty reports on oil and gas jurisdictions around the world with help from PFC Energy and Rodgers Oil & Gas Consulting. Alaska is discussed in the third report, which covers oil and gas jurisdictions in the Arctic. The sixth report, a summary report, is due out early next year.
The Legislative Budget and Audit Committee purchased the reports, along with a database compiled by the energy research firm Wood Mackenzie, in late 2010. The Van Meurs Corp. has granted limited-time access to its reports to news organizations, including Petroleum News.
Van Meurs finds ACES, HB 110 flawed
Van Meurs is critical both of the current tax, dubbed Alaska’s Clear and Equitable Share, and of Gov. Sean Parnell’s proposal to fix it.
Van Meurs describes Alaska as one of a few Arctic jurisdictions that combine high taxes with generous incentives. (Other jurisdictions tax at a lower rate, but offer less support up front.) Among the 37 Arctic oil tax regimes van Meurs considers, Alaska is grouped in the middle, given three stars out of five in terms of attractiveness from an investor standpoint.
But van Meurs contends that Alaska’s system is too extreme. The highly progressive tax limits companies’ returns at high oil prices and, combined with high tax credits, can result in state support for developments nearing or even exceeding 100 percent, giving companies little incentive to reduce costs.
Despite the generous credits, van Meurs argues that Alaska doesn’t do enough to incentivize the two commodities that could boost state revenues and ensure a long-term future for the North Slope: heavy oil and natural gas.
He adds that setting the progressivity surcharge based on the combined price of oil and gas (on a barrel-of-oil equivalent basis) will likely result in paltry or even negative incremental revenue for the state when North Slope gas is developed. Van Meurs advocates separating the tax on gas from that on oil — “decoupling” — but adds that the tax rate for gas would then have to be reduced.
Van Meurs writes that Gov. Sean Parnell’s HB 110, a modified version of which passed the House last session, and HB 17 by Rep. Mike Hawker, would indeed increase returns for producers, but would not address the flaws in the current tax.
The governor’s proposal to offer a lower rate for new fields could actually be counterproductive because it would force those developments to be taxed separately — to be “ringfenced” — while other developments can be written off existing production elsewhere in the state.
