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Governor looking at well workover tax credits and other production incentives
Kay Cashman, PNA publisher & managing editor
At Arctic Power’s 19th annual meeting Feb. 14 in Anchorage, Gov. Frank Murkowski offered some specifics on what he is considering to stimulate Alaska’s oil production.
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 in the short term.
“This proposal could offer producers a short window of opportunity, maybe two, three years, to take advantage of a well workover credit,” Murkowski said.
The administration is also “looking at project-specific incentives” to develop heavy oil.
The governor said, “This could involve a tax or royalty break if the wellhead price (for viscous oil) … would fall below a certain price per barrel.”
The incentive would be offered only to those viscous oil producers who are not already producing, or planning to produce, viscous oil.
Murkowski also said “the major companies who hold the leases on heavy oil and elect not to develop them in the short term” will be encouraged by the state to “farmout their interests to independents who specialize in heavy oil development.”
Exploration incentives under review Streamlining existing incentives is also under consideration. The administration is reviewing 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 said.
The process, he said, “requires a special hearing and volumes and volumes of paperwork to the state to justify the incentive. The process is far more complicated than what other states require for exploration. The question we have: Is it necessary?”
If Alaska were to follow the example of other states Murkowski said “we could increase exploration drilling on the North Slope.”
The governor is also looking at requiring companies to make seismic data public after eight to 10 years. He said, “currently there is no time limit in making this data available.”
Removing impediments 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,” he said.
Another impediment to development cited was the lack of roads on the North Slope. The state is “taking a very serious look at (building) a state road to Nuiqsut,” Murkowski said.
Another impediment to development that he would like to see removed is the “high cost” of transporting oil through the trans-Alaska pipeline system.
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.
Murkowski would like to see the trans-Alaska pipeline tariff lowered by “50 cents to a dollar or more over the next few years.” More development on western North Slope The governor is also in discussions with ConocoPhillips Alaska, Anadarko Petroleum Corp. and the Bureau of Land Management, trying to accelerate the development of oil and gas fields on state lands in the vicinity of the National Petroleum Reserve-Alaska and ConocoPhillips’ nearby Alpine field. (See related news item on page 1, top story.)
“There are multiple fields with substantial potential now being considered for development in this area,” Murkowski said.
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