Parnell proposes refinery incentives

Gov. Sean Parnell has proposed changes to Alaska statutes to provide incentives for the in-state refining of Alaska crude oil.

The governor has introduced legislation that would provide for new in-state refinery tax credits and for royalty-related incentives for oil sold to in-state refineries. Alaska currently has four commercial refineries: the Flint Hills refinery at North Pole near Fairbanks; Petro Star’s refineries at Valdez and North Pole; and the Tesoro refinery at Nikiski on the Kenai Peninsula. Flint Hills recently announced the imminent closure of its North Pole refinery, triggering significant concern from the state administration.

“A healthy refining industry in our state benefits Alaskans in many ways, including jobs and economic opportunity, as well as refined fuels for use in our homes and businesses,” Parnell said in a March 31 announcement of his refinery incentive proposal. “By creating a more favorable tax climate, we have the opportunity to keep an industry strong that provides jobs for Alaskans, adds value to Alaska’s oil, secures our military’s source of fuel, and helps make Alaskan resources accessible to Alaskans.”

The proposed legislation would enable an in-state refinery that processes at least 17,500 barrels per day of oil to claim a credit of $15 million against state corporate income tax, and a tax credit for certain qualified infrastructure expenditures. Combined tax credits for a single refinery could not exceed $20 million in a tax year. And a refiner could claim an appropriate refund, if the tax credit for a refinery exceeds the refinery’s tax liability.

To encourage the sale of oil to in-state refiners, the proposed legislation would also establish a procedure whereby a state oil lessee could use the price of oil it sells to an in-state refinery to set the value of royalty oil that it owes to the state.

—Alan Bailey