February 14, 2003 --- Vol. 9, No. 18February 2003

Governor looking at well workover tax credits and other incentives to increase production in near-term

At Arctic Power’s 19th annual meeting today in Anchorage, Gov. Frank Murkowski offered some specifics on what he is considering to stimulate Alaska’s oil production in the short term.

In addition to his plans to reform permitting, he said he is looking at offering producers tax credits for working over existing wells to stimulate production.

The administration is also “looking at project-specific incentives” to develop heavy oil and encouraging “major companies who hold the leases on heavy oil and elect not to develop them in the short term” to “farm out their interests to independents who specialize in heavy oil development.”

The administration is considering streamlining the state’s current tax incentive for exploration that “allows companies to offset a portion of their state severance tax or royalty oil by the amount of up to half their exploration cost for new wells.”

The governor is also looking at requiring companies to make seismic data public after eight to 10 years.

Murkowski cited lack of affordable access to North Slope facilities and pipelines as a “major disincentive for independents. … One option for addressing this situation is for the state to require — as a condition of approving development plans — reasonably priced access by other companies when there is excess capacity available.”

Another impediment to development, Murkowski said, was the lack of roads on the North Slope. The state is “taking a very serious look at (building) a state road to Nuiqsut.”

Finally, he would like to see the trans-Alaska pipeline tariff lowered by “50 cents to a dollar or more over the next few years.”

The administration is “in the process of meeting with Alyeska Pipeline and the (TAPS) owners to review what steps could be taken to lower the costs for transportation,” the governor said.

Canada wants to dissuade U.S. from subsidizing pipeline

The Canadian government will try again later this month to impress on U.S. legislators the dangers of contemplating subsidies for a proposed Alaska Highway natural gas pipeline.

Indian Affairs and Northern Development Minister Robert Nault said Feb. 13 he will make the trip to Washington because of worries that talk of loans and a guaranteed gas price to open the way for a $20 billion pipeline from the North Slope are about to be revived.

“My understanding is it’s alive and well and will be reactivated … if it’s not already,” Nault told a Calgary news conference. “The message to our American friends will be that (Canada) can deliver a secure supply of energy … and we can do it using market forces — there’s no need to subsidize different routes to make it profitable,” he said.

In the course of several meetings, Nault said the Canadian government has not ruled out loans guarantees for a Mackenzie Valley pipeline, although he said that is “not in our interest.” However, he said the government might be willing to participate in local infrastructure and job training for aboriginals.

He expressed confidence that Mackenzie Delta gas owners are close to filing regulatory applications for a pipeline.

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