Legislature(2011 - 2012)

2012-04-18 House Journal

Full Journal pdf

2012-04-18                     House Journal                      Page 2586
HB 3001                                                                                                                       
HOUSE BILL NO. 3001 by the House Rules Committee by request of                                                                  
the Governor, entitled:                                                                                                         
    "An Act relating to adjustments to oil and gas production tax                                                               
    values based on a percentage of gross value at the point of                                                                 

2012-04-18                     House Journal                      Page 2587
    production for oil and gas produced from leases or properties                                                               
    north of 68 degrees North latitude; relating to monthly installment                                                         
    payments of the oil and gas production tax; relating to the                                                                 
    determinations of oil and gas production tax values; relating to oil                                                        
    and gas production tax credits including qualified capital credits                                                          
    for exploration, development, or production; making conforming                                                              
    amendments; and providing for an effective date."                                                                           
was read the first time and referred to the Resources and Finance                                                               
The following fiscal note(s) apply:                                                                                             
1.  Indeterminate, Dept. of Revenue                                                                                             
The Governor's transmittal letter dated April 18, 2012, follows:                                                                
"Dear Speaker Chenault:                                                                                                         
Alaska's oil belongs to Alaskans, and oil production drives Alaskan                                                             
opportunity. Alaskan engineers, contractors, and maintenance                                                                    
personnel earn their livelihoods from oil production; but so -                                                                  
indirectly - do restaurateurs, retailers, working men and women of all                                                          
trades, and business owners. Oil production also supports the public                                                            
sector, providing revenue that creates opportunities for schools, public                                                        
safety, roads, libraries, energy infrastructure, and many other services                                                        
for Alaskans.                                                                                                                   
Alaskans are well aware that oil production from the legacy fields is                                                           
declining. The costs of maintaining a declining field go up, and higher                                                         
cost barrels of oil get left in the ground if they are not economic to                                                          
produce. That is the risk - that without meaningful tax change for                                                              
legacy fields as well as new fields, a larger percentage of Alaskans'                                                           
resource will remain locked in the ground. We can avoid this risk and                                                           
ensure a more prosperous future for Alaskans if we are willing to                                                               
continue working to increase oil production in all of Alaska's fields.                                                          
We must take decisive action to ensure that Alaska's petroleum                                                                  
resources are developed sensibly, starting with a tax structure that is                                                         
designed not to maximize short-term revenues, but rather to ensure                                                              

2012-04-18                     House Journal                      Page 2588
Alaska's long-term competitiveness. The Legislature has completed                                                               
much study, the public is better informed, and the House and Senate                                                             
now have positions on the table.                                                                                                
I am submitting a piece of legislation that blends the positions of the                                                         
House and Senate into a comprehensive approach that will bring                                                                  
economic opportunity to Alaskans for generations to come. Under the                                                             
authority of Article III, Section 18 of the Alaska Constitution, I am                                                           
transmitting a bill proposing amendments to Alaska's oil and gas                                                                
production tax. The bill would provide tax incentives for the oil and                                                           
gas industry to increase exploration for new sources and greater                                                                
development of existing fields.                                                                                                 
The bill incentivizes new oil and gas production on the North Slope by                                                          
providing a 30 percent exclusion, based on gross value at the point of                                                          
production, from the production tax value used to calculate the base                                                            
rate and the progressivity tax for the first ten years of sustained                                                             
production from fields that were not, as of January 1, 2008, within a                                                           
unit or in commercial production. For currently producing North Slope                                                           
fields, the bill establishes an exclusion of 40 percent of gross value at                                                       
the point of production from the monthly production tax value used to                                                           
calculate the progressivity tax. The bill caps progressivity by                                                                 
establishing a 60 percent maximum rate. Finally, the bill would extend                                                          
tax incentives for well lease expenditures available elsewhere in the                                                           
state through AS 43.55.023(l) to North Slope activities and would                                                               
allow producers to apply tax credits in one year. These changes are                                                             
designed both to encourage development of new, currently                                                                        
undeveloped leases or properties, and from known fields in the state.                                                           
These changes to Alaska's oil tax regime would foster new production                                                            
sources and encourage further development of current sources to stem                                                            
the decline in North Slope production.                                                                                          
I urge your prompt and favorable action on this measure.                                                                        
Sean Parnell