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Vol. 12, No. 28 Week of July 15, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Tax modification adviser wanted

Alaska Department of Revenue looking for expert to advise on potential restructuring of PPT for special fall legislative session

Kristen Nelson

Petroleum News

Although the Alaska Department of Revenue is concerned about having enough information on how the petroleum profits tax enacted last year is working to take to the Legislature in a potential fall special session (see story in July 8 issue of Petroleum News), it is preparing possible modifications for North Slope oil and natural gas production taxes.

The department put out a request for proposals July 10 for an adviser “to provide expertise regarding possible restructuring of the production tax for oil and gas structures for North Slope natural gas.”

The RFP said Revenue’s Tax Division “is developing possible modifications to its production tax as applicable to North Slope oil and natural gas.” The proposals would be “in preparation for a possible special session in the fall of 2007 in which the modifications will be presented to the Alaska Legislature.” The selected contractor would be relied on for advice as the project moves forward and would also provide public testimony on the proposals.

Revenue already studying gas tax structures

Revenue is already looking at “the appropriateness of potential production tax structures and competitive government take in gauging a tax structure, and has examined what constitutes similar economic risk for a potential Alaska gas project where there are other investment opportunities of similar economic risk for natural gas development,” the RFP said.

Revenue said it is receiving detailed reports on these similar projects and “is modeling their detailed financial metrics, including government take.”

The department is also reviewing “the appropriateness of the current system” for oil production taxes, modified in 2006, because “there is evidence that the process may have been flawed,” the RFP said. Because the new system is based on net income, the department said there are concerns about both the ability to audit and to anticipate costs. The state’s prior production tax system was based on gross income, and the department said it is “deliberating the relative merits of net vs. gross-based systems.”

“There are currently several producing oil fields varying in size, age, complexity, quality and distance to infrastructure, and there are several additional potential investment opportunities,” the department said.

Division on tight timeline

The department said what it is looking for with the RFP is “a firm to provide expert tax consulting services in reviewing and preparing a production tax proposal for Alaska’s oil and gas.”

The contractor will assist the Tax Division with a proposal for production tax modifications for a potential special session of the Alaska Legislature to be held this fall.

“Assistance is needed from the contractor in examining the current oil and gas tax structures and potential amendments, and preparing a production tax proposal for consideration by the administration. They will also provide testimonial support and advice during a special session if there is one.”

Revenue said the Tax Division “is on an extremely tight timeline and needs to have a work product that has been reviewed by the contractor within a week after contract award.”

Proposals are due July 19 and the state plans to award a contract July 20; it would run for approximately six months and has a price tag estimated at $350,000 to $400,000.



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