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Dept. of Revenue gathers spending data Department works with oil companies to understand trends in Alaska expenditures; spending from 2006-10 broken into 5 categories Stefan Milkowski For Petroleum News
In an effort to better understand trends in North Slope spending, and in response to clamor from lawmakers, the Department of Revenue has started gathering additional information from oil producers.
The department worked with oil companies last fall to develop a system for breaking spending into five different categories, Deputy Revenue Commissioner Bruce Tangeman explained in an interview Jan. 17. The categories are geological and geophysical, exploratory drilling, development drilling, facilities and other.
“We’re getting the capital spend that we’ve been gathering since the PPT was put in place, but basically we’re going back and gathering it in a useful format,” Tangeman said. “This is something that should have been done from day one.”
The information covers expenditures included in companies’ tax filings, but is being submitted independently of the tax filings.
For the years 2006 to 2010, companies revisited past expenditures and divided them into the five categories. A similar process will happen for 2011. The department will request more detailed information starting in 2012, but may be limited by the fact that companies classify their expenditures in different ways, according to Tangeman.
Interest in investment patterns The 5-year look back covers only capital spending; starting in 2012, DOR will gather additional information on capital and operating expenses.
Ultimately, the goal is to help understand industry investment patterns since the state’s shift from a gross production tax to a profits-based tax — first the petroleum profits tax, or PPT, and then Alaska’s Clear and Equitable Share, or ACES.
“We have the luxury now that we can look back and see what’s been happening under the tax structure and use that information to make changes going forward,” Tangeman said.
According to Tangeman, the information gathered so far supports the tax reductions the Parnell administration is proposing in HB 110. “It’s certainly confirming that we have a problem here,” he said.
Despite continued high oil prices, North Slope production continues to decline, Tangeman said. “Spending is not up like we’re seeing elsewhere.”
Operating toped capital in 2011 Tangeman added that 2011 was the first year that operating expenditures topped capital expenditures. “We’re spending more and producing less,” he said.
Tangeman said the department will present the new spending information to lawmakers in Juneau. The department is aggregating the figures to ensure taxpayer confidentiality.
Rep. Berta Gardner and three other House Democrats recently filed legislation seeking additional disclosure from oil companies. Their HB 263 would require companies claiming tax credits for expenditures to provide a “detailed description of the purpose of the expenditure” and say what the expenditure was for and what lease it applied to.
“(F)or hundreds of millions a year in oil industry tax credits, Alaskans need to know exactly what we’re buying,” Gardner said in a news release.
Tangeman said he has not studied the bill, but he suggested it isn’t needed. He said the department already has the statutory authority to request information from oil companies and is in the process of figuring out exactly what information is needed and how best to gather it from companies. He added that the industry has been “very cooperative” so far.
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