Legislature(2009 - 2010)SENATE FINANCE 532
02/24/2010 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Progressivity Profitability Parity Gas | |
| Oil and Gas in Alaska's Production Tax | |
| Gas Issues and Alaska's Fiscal Design | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 24, 2010
1:34 p.m.
1:34:59 PM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 1:34 p.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice-Chair
Senator Johnny Ellis
Senator Dennis Egan
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
None
ALSO PRESENT
Pat Galvin, Commissioner, Department of Revenue; Dan
Dickinson, Legislative Budget & Audit Consultant; David
Wood, Legislative Budget and Audit Consultant; Senator Joe
Paskvan; Senator Gary Stevens; Senator John Coghill
PRESENT VIA TELECONFERENCE
None
SUMMARY
2010 Oil and Gas Production Tax Review
Progressivity Profitability Parity Gas
Oil and Gas in Alaska's Production Tax
Gas Issues and Alaska's Fiscal Design
^Progressivity Profitability Parity Gas
1:35:13 PM
PAT GALVIN, COMMISSIONER, DEPARTMENT OF REVENUE, referred
to a handout entitled, "Progressivity, Profitability,
Parity Gas" (copy on file). He turned to slide 31 which
showed a graph that deals with production tax attributed to
gas under the proposed 15 AAC 90.220, or the AGIA tax
inducement. He explained that the regulations merely put
into place the way that the tax is figured. He emphasized
that the numbers on the slide are being used for
illustration only and do not represent reality.
1:39:41 PM
Co-Chair Stedman asked how the production tax value (PTV)
on a barrel of oil (BOE) basis was calculated to arrive at
$47. Commissioner Galvin explained that the PTV on oil and
gas was calculated using the combined taxable volume. Take
ANS price on annual production and subtract the royalty
value and you get a taxable volume. Do the same for the gas
having to convert the volume into the BOE. He offered to
provide the formula.
Commissioner Galvin referred to slide 32 and reminded the
committee that the $300 million figure is meaningless in
actual value. He stressed that the value of the slide is to
demonstrate a model. He explained the AGIA tax exemption
formula on slide 32.
Co-Chair Hoffman pointed out that the model locks in the
tax. He wondered if it takes away the state's ability to
raise the tax. He wondered why the state should raise
production taxes. He suggested setting the rate for the gas
tax exemption.
1:45:04 PM
Commissioner Galvin addressed two issues raised by Co-Chair
Hoffman. All of the gas represented in slide 31 is being
transported on capacity acquired during the initial open
season. It is likely that there will be some capacity
acquired during this open season and in subsequent seasons.
At that point if there is a change in production tax on gas
the exemption would only be available to those who acquired
capacity during the initial open season.
Commissioner Galvin said Co-Chair Hoffman was correct in
that all of the gas is shipped on capacity acquired during
the initial open season. The effect of the exemption is
that the legislature could not raise the gas production tax
effectively above the figure that is calculated in this
method. He stated that he was presenting information in
order for the legislature to decide if it was acceptable.
The legislature will have to make a determination as to
whether this calculation method results in a gas production
tax that is locked in being and low.
Co-Chair Hoffman opined that the legislature might want to
look at options where it is not locked into a gas
production tax. He asked what options the legislature has
if it decides not to lock in a gas production tax.
Commissioner Galvin was not prepared to answer that
question because of a legal issue regarding upstream
inducement.
Co-Chair Stedman commented on the amount of flexibility the
legislature has after May 1. Commissioner Galvin thought
the legislature had the authority to make decisions
regarding the production tax. The question raised was
whether the legislature can change the nature of the
inducement or eliminate the inducement between now and May
1. Commissioner Galvin did not have a legal opinion as to
the answer to that question.
1:49:10 PM
Senator Thomas returned to the gas ratio scenarios
previously discussed. He wondered if the inducement, in the
form of a reduction in production taxes, is money that
stays with the industry. Commissioner Galvin said yes.
Senator Thomas suggested offering credits in the form of
in-field drilling or some shaving of progressivity. He
suggested these ideas as a way of saving money.
Commissioner Galvin reminded the committee that the slide
is just an example of a scenario. He suggested looking at
the state's take under various scenarios. At different
ratios the state would fare less well.
1:52:46 PM
Co-Chair Stedman wished for more information about the
impact of the royalty inducement. Commissioner Galvin
explained that the royalty inducement provides a
methodology for establishing the market value of gas for
royalty calculations purposes using a methodology that
would be more easily calculated by the producer than the
current method. Under the inducement for value, there would
be a calculation based upon published prices in the market.
The change in the royalty value is a product of how closely
the published prices are to the actual sales contracts. In
an efficient market there would be little deviation in that
value under either methodology. The benefit to the taxpayer
is more predictability. The second royalty inducement has
to do with the state's ability to switch between in-kind
and in-value.
1:56:02 PM
Commissioner Galvin discussed the value issue. If it were
to be taken in-kind, the state is obligated to meet the in-
value price. The numbers should be similar at the end of
the day. The benefit of the inducement is based on the
certainty on the part of the producer as to whether or not
the state is going to take their gas in-kind or in-value.
Under the current leases, the state is able to switch with
only a few months notice.
Co-Chair Stedman asked about the example and how the
royalties apply if taken in-kind. Commissioner Galvin
explained that royalty in-kind means taking the state's
contractual right to a royalty in the form of gas. The only
way that an in-kind take on the part of the state is going
to effect the bottom line on the chart, is if the state
chose to take its tax in-kind. He suggested several ways of
making that calculation. Co-Chair Stedman requested that
the commissioner provide more information. Commissioner
Galvin continued to explain taking tax value in-kind.
2:00:39 PM
Commissioner Galvin turned to price expectations and
forecasting challenges. He turned to slide 34, which shows
a graph on oil/gas price parity. He questioned what would
happen in the future.
2:02:56 PM
Commissioner Galvin explained slide 35 - U.S. DOE Energy
Information Administration (EIA) forecasting, which is
widely quoted, but usually not accurate. He related the
history of EIA's forecasting since 1980. He showed how
EIA's forecasting is not even close - slides 36 and 37.
2:05:15 PM
Commissioner Galvin reviewed slides 38 and 39. In the past
five years, the state has gone from an expected major gas
shortfall to awash in gas. The question of what happens
from 2020 to 2030 depends on what the relationship of oil
to gas might be at that time. He concluded that the state
needs an approach that adapts to any number of possible
future states.
2:06:59 PM
Commissioner Galvin concluded by discussing policy issues
associated with the gas tax. Slide 41 shows the gas tax
policy options by 2014: the state's appropriate cash flow
from a pipeline, the risks the state is willing to bear,
and the level of certainty the state will provide. The
fiscal system is a policy consideration and entails risks.
The current system could be left as is, accepting that gas
price risk is an incentive for producers. The state could
eliminate the risk that combined oil and gas tax revenue
would be less than the current oil tax. It could reduce the
oil tax thus reducing the effect of price parity. Or, the
state could separate or ringfence gas production for state
production tax purposes.
2:10:17 PM
Co-Chair Hoffman asked if the options are available
regardless of what happens in the open season. Commissioner
Galvin said they were, to the extent that the gas
production tax for the gas shipped on capacity is capped
based upon the earlier methodology. Co-Chair Hoffman
wondered how the lock-in coincides with the Alaska State
Constitution, which says legislation cannot bind future
legislatures from setting tax policy. Commissioner Galvin
thought the legislative record was clear that the AGIA tax
inducement was crafted with that in mind, in good faith.
Co-Chair Hoffman restated a statement that Commissioner
Galvin made, "Except for the provisions of the formula that
were set in AGIA, we can manipulate the gas tax structure."
Co-Chair Hoffman asked which statement was accurate.
Commissioner Galvin explained that the statement was made
assuming that the legislature would want to honor the
exemption in the AGIA statute. Each legislature, moving
forward, has the authority to decide to remove that
exemption.
Co-Chair Stedman asked if there was any recourse the
industry could bring against the legislature. Commissioner
Galvin did not think so. He said that the legislature could
decide whether or not to keep the exemption in place.
Co-Chair Stedman pointed out the May 1 deadline has no
validity next January 20, 2011, when the legislature is
back in session. Hypothetically, the legislature could
scrap the whole thing and rewrite the gas tax. Commissioner
Galvin stated that it has as much validity as the
legislature chooses to give it.
2:14:41 PM AT-EASE
2:18:44 PM RECONVENED
^Oil and Gas in Alaska's Production Tax
DAN DICKINSON, LEGISLATIVE BUDGET & AUDIT CONSULTANT,
referred to a handout out entitled, "Oil and Gas in
Alaska's Production Tax"(copy on file). He began with slide
2 - "Why are we going through all these numbers?" He listed
the following questions:
Is this system stable or robust and likely to be
viable over a wide range of conditions (including a
good environment for a gas project)?
Are the cross subsidies clear and rational?
How will the state react if there are large drops in
tax revenue? To whom will it look for revenue?
He noted that there were two ways of measuring the issue:
How much does gas "drag down" or "compensate" oil
progressivity?
How much will tax revenues fall because a gas project
is added?
Finance Committee
2:26:10 PM
Mr. Dickinson posed a scenario where the fall in revenues
is so great that it eats up all the royalties due to the
state. Co-Chair Stedman asked what numbers Mr. Dickinson
was referring to.
Mr. Dickinson emphasized that he was talking about oil and
gas values that have been seen in the market place in the
Lower 48 and the kinds of costs it will take to achieve
those values and who will bear the risks to do so. Mr.
Dickinson restated that the main points remain how much oil
sells at the market, which has fluctuated greatly.
2:27:31 PM
Mr. Dickinson explained slide 3 to explain how the combined
oil and gas tax works. He detailed an oil-only scenario
when oil is at $80 per barrel. He explained the formula to
get to $4.2 billion, which is the total tax rate.
2:33:09 PM
Mr. Dickinson detailed how the scenario would change if gas
were added. He explained the formula to get to $821.6
billion total tax rate for stand alone gas.
Co-Chair Stedman commented that additional information
would be added with the ratio of gas to oil in various
scenarios.
Mr. Dickinson related that he chose this scenario because
it depicts a 50/50 ratio of oil to gas.
2:36:46 PM
Mr. Dickinson pointed out that gas is not worth what oil is
worth on an energy equivalent basis. He pointed out that in
the examples he uses he has listed all upstream costs on
the oil side. The cost of moving gas is borne by oil.
Mr. Dickinson continued to explain the tax formula using a
combined scenario. He explained that the law considers the
taxable value of everything. The total tax for the combined
gas and oil scenario is $4.1 billion, which is less tax
than is generated by oil alone. He noted that credits would
change the total dollar amount, but the relationships would
be the same.
2:40:49 PM
Mr. Dickinson explained that there are different ways to
measure the tax. The first total is the sum of stand alone
oil and gas; the second number is the gain or loss in
production tax from using current gas versus the stand
alone analysis; and the third figure is the gain or loss in
production tax form adding gas stream under current law.
Co-Chair Stedman asked Mr. Dickinson to point out the
differences in the administration's plan.
Mr. Dickinson moved on to slide 4 which shows the previous
scenario using numbers from January 2010. The tax is again
lower by combining oil and gas.
Co-Chair Stedman asked if the figures were actual market
values. Mr. Dickinson said they were. He stated that he
took the most favorable of the numbers provided by
TransCanada.
Mr. Dickinson moved on to slide 5: "Looking Forward:
Combined Progressivity Tax (CPT)". The graph is based on
real numbers from June of 2008. Gas and oil exported from
the state are taxed at the same rate. Both are part of a
combined progressivity calculation. Price swings in one can
affect the tax on the other. Gas is shown converted to oil
on a Btu basis, roughly six to one. Progressivity is
triggered by $30 BOE PTV. He explained the calculations
shown on the graph.
2:45:50 PM
Mr. Dickinson noted that he was using several Gaffney Cline
slides in his presentation.
Co-Chair Stedman asked if the presentation was given to the
Joint Resources Committee. Mr. Dickinson recalled
presentations to LB&A, Joint Resources, Senate Finance, and
Resources.
Mr. Dickinson turned to slide 7 to explain the response to
Mr. Dickinson from Gaffney Cline. The basic elements were
introduced in the 2006 tax changes; the focus was on oil;
and gas was "on hold" waiting for the release of the
"Stranded Gas Development Act" contract (May 2006).
2:48:17 PM
Mr. Dickinson showed slide 8, a Gaffney Cline slide, which
depicts cross subsidies and less tax. The cross subsidy
issue caused by progressivity was also discussed at great
length and it was shown how, under certain circumstances,
the "effective" rate of tax on a higher cost/lower
profitability development (such as gas or heavy oil) could
be lower than the base rate. It was also noted that any
evaluation involved many commercial and economic parameters
that would need to be evaluated across a range of expected
values.
Mr. Dickinson showed another Gaffney Cline slide. Slide 9
shows that pricing parity is key. One way to predict the
future is to look at the past. The graph shows that the
past was not a good predictor of the future.
Mr. Dickinson showed slides 10 - 12, updated Gaffney Cline
slides under different scenarios.
Mr. Dickinson explained that slide 13 portrays a scenario
where less combined tax is collected. It shows that
modifying the oil/gas price parity is revealing. Around 13
is the point to declare the gas tax unnecessary.
2:53:26 PM
Mr. Dickinson described slide 14, another scenario where
less combined tax is collected. Tax revenues fall with a
parity ratio of 25. The amount collected equals less tax
and overwhelms the royalty that would be paid. The higher
parities result in less tax, not more.
Co-Chair Stedman asked if payments are made monthly. Mr.
Dickinson responded that there is still a net cash flow to
the state. The amount of tax has fallen so much that the
state would still receive a royalty check, but it would be
very small. Production tax and royalties are paid monthly,
but would result in a net loss in revenue to the treasury.
Mr. Dickinson addressed slide 15, the impact of varying
both oil and gas production and price ratios. When the oil
and gas volumes are equal, there is maximum dilution at a
given price.
2:57:22 PM
Mr. Dickinson noted the effects of volume. The numbers used
in the graph that reflect future projections will not be so
dramatic.
Mr. Dickinson summarized Gaffney Cline's findings and added
his own comments on slide 17. A range of possible outcomes
caused by ACES' structure was identified, reviewed and
built into the final design of ACES to provide incentives
to both existing SOA producers, as well as to new entrants.
He questioned if these were well-targeted incentives.
Mr. Dickinson continued. When evaluating ACES and a
possible gas line, reasonable results are obtained when
real world input values are used. Reasonable results
include material potential tax revenue losses from a gas
line. He stated that nobody has brought forth expected,
sustainable scenarios to show that ACES needs to be
modified.
Mr. Dickinson turned to slide 18 - solutions. He suggested
changing AS 43.55 before the open season. When revenues are
actually impacted, add a recoupment factor outside of AS
43.55 - for example, in Income Tax or in a new section. He
maintained that locking down current production taxes under
AS 43.55 is not prohibiting any additional revenue
enhancements in relation to a gas project.
He requested that AS 43.55 be left alone; instead, a
revenue raising statute could be written.
3:03:28 PM
Co-Chair Stedman stated that the interest is not so much to
increase state revenue, but rather to prevent a leakage or
erosion of the entire gas revenue stream.
3:04:09 PM AT EASE
3:10:33 PM RECONVENED
^Gas Issues and Alaska's Fiscal Design
3:10:56 PM
Co-Chair Stedman introduced David Wood whom the legislature
hired a year and a half ago to help with an oil and gas tax
structure.
DAVID WOOD, LEGISLATIVE BUDGET AND AUDIT CONSULTANT,
referred to a handout entitled, "Gas Issues and Alaska's
Fiscal Design" (copy on file). Mr. Wood reported that he
brings an independent, detached perspective to the issues.
3:13:22 PM
Mr. Wood began with slide 2 - a presentation structure
which focuses on the key issues pertaining to natural gas
in Alaska in the context of establishing a long-term and
enduring fiscal design:
What are the issues for Alaska's fiscal regime when
applied to gas?
What are the fiscal designs applied by other
countries?
What are the risks and opportunities for
international gas suppliers?
Alaska's Prevailing Fiscal design Complications of
combined oil and gas progressivity tax (CPT).
Multi-year and multi-scenario fiscal performance cash
flow models.
Conclusions and recommendations.
3:15:50 PM
Mr. Wood turned to the issues for Alaska's fiscal regime
when applied to gas. He explained that Alaska is one of
several potential long-term suppliers of natural gas to the
Lower 48 - slide 4. He noted that fiscal terms are one of
several factor that influence the delivered price of gas
into a market and it is important to understand differences
among competing sources. He pointed out that the long-term
competition to deliver natural gas to the Lower 48 is
intense. He noted that the major companies that are
invested in Alaskan oil are also involved with large gas
investments in competing countries. He questioned why the
Alaskan project was not yet sanctioned.
3:17:36 PM
Mr. Wood offered a slide which shows that international gas
markets are growing, and competition for gas is increasing
- slide 5. North America is a relatively small market
relative to other markets. He labeled the 2020 and 2030
forecasts as optimistic.
Mr. Wood pointed out that the major IOC's are signing long-
term binding international gas agreements - slide 6. He
showed a list of some of the large LNG sale and purchase
agreements struck in 2009. He concluded that there is
enthusiasm by the gas buyers and the international oil
companies to enter into long-term gas agreements.
3:20:48 PM
Mr. Wood turned to slide 7 - worldwide new gas liquefaction
developments to 2013 and beyond. He detailed several
projects. The arrows show newly sanctioned operations. He
noted that the volume of new gas increased worldwide by 12
percent between November and December 2009.
Mr. Wood noted that gas imports to the U.S. declined in
2008 for the first time in more than a decade - slide 8.
The reason is primarily from the impact of shale gas in the
Lower 48. Slide 9 shows that LNG imports to the U.S. are
down. The U.S. market is out of synch with the rest of the
world. Shale gas is the key factor.
3:24:01 PM
Mr. Wood reported that Canadian gas imports to the U.S. are
down - slide 10. Slide 11 depicts the global LNG
supply/demand forecast to 2020. The expectation is a period
of low gas prices and a natural gas surplus. Sanctioning of
the Alaska gas line will take place during this trend.
Looking forward from 2014 to 2020, there will be an
international gas deficit. He suggested considering the
long-term value of LNG.
3:26:44 PM
Mr. Wood discussed the U.S. oil-to-gas price ratio and what
range fiscal designs should consider - slide 12. The price
parity numbers have risen to the 20 level in recent months.
Mr. Wood looked at the EIA forecast - slide 13. The latest
U.S. government forecast shows high oil-to-gas ratios
through 2035. He maintained that a price spike in a couple
of years would have a significant impact on gas value. He
concluded that it would lead to cross subsidy dilution.
3:30:11 PM
Mr. Wood examined what fiscal designs are applied by other
countries and what the risks and opportunities were. Slide
15 is a summary of international upstream oil and gas
fiscal designs. Slide 16 looks at Norway, which has a
mineral interest system, in fiscal terms. He made the point
that they are progressive systems and do not have fiscal
elements such as bonuses or royalties. There are also
incentives such as credits in the system. He said the state
take is 80 percent, higher than Alaska's take, and it still
attracts foreign business for investment.
3:33:36 PM
Mr. Wood related the fiscal terms of Papua New Guinea -
slide 17. The fiscal system is also a mineral interest
system and a progressive fiscal system. Upsurge in interest
in large LNG projects led to legislative changes offering
progressivity and stability. Slide 18 examines Australia's
fiscal terms. It also has a progressive system. He said
Australia's fiscal take is similar to Alaska's. He
suggested Alaska consider these designs.
3:36:30 PM
Mr. Wood turned to slide 19 - Alaska gas compared on an
international scale of risk versus opportunity. The
diameters of the bubbles are proportional to proved natural
gas reserves.
Mr. Wood turned attention to Alaska's prevailing fiscal
design. Slide 21 highlights elements of Alaska's prevailing
oil and gas fiscal design. He explained the graph. The
three points on the left stand out as regressive elements.
Alaska is unique because its regressive elements are more
significant than other countries' elements. No other
country gives inducements at "this end of the scale". Mr.
Wood said it is more logical the way Alaska applies
aggressive elements compared to other countries.
3:40:41 PM
Mr. Wood explained the regressive and progressive elements
of Alaska's design - slide 22. It is not common to see
inducements rolled into a fiscal structure like Alaska
does.
Mr. Wood highlighted key regressive elements in Alaska's
design - slide 23. He suggested consideration of de-linking
oil and gas in progressivity. The inducements at the
progressivity end won't help investments being made in
heavy oil, marginal fields, and when prices are low.
3:43:15 PM
Mr. Wood talked about how progressive and flexible fiscal
designs help to promote investment - slide 24. He referred
to slide 25 and maintained that progressivity should work
well for Alaska. He compared fiscal take in Alaska with
international companies. It's the regressive elements that
need relief. The producer take is substantially less than
the Alaska take under the current system. Combined
progressivity is acting as an inducement. He suggested an
area where inducements could help. He concluded that
international companies are willing to be involved in
projects that offer a far lower return than Alaska's
current fiscal design. Putting a subsidy at high oil/gas
prices does not make sense.
3:47:30 PM
Mr. Wood said that high discount rates suggest higher
government take of revenues - slide 26. It is appropriate
for governments to use lower discount rates than producers.
High discount rates impact long-term divisible profits and
operating costs more than upfront capital costs diminish
producer take.
3:49:38 PM
Mr. Wood turned to complications of combined oil and gas
progressivity tax (CPT). Slide 28 deals with problems with
Alaska's current progressivity tax from the natural gas
perspective.
Mr. Wood explained that slide 29 discusses the impact of
natural gas on combined oil and gas production tax.
3:51:13 PM
Mr. Wood turned to a graph on slide 30 - natural gas
dilution effects on combined oil and gas production tax. He
showed the dilution affect at under various scenarios. The
lower the gas production tax value, the greater the loss,
in terms of the cross subsidy.
Mr. Wood referred to a presentation by Gaffney Cline &
Associates (GCA) on February 22, 2010. He said he worked
with their model and transformed it to calculate oil and
gas combined BOE - slide 30. He stressed the importance of
wide ranges. Gas price parity should be taken into
consideration. He spoke of calculating the production tax
values. He demonstrated calculations, described what they
were doing, and showed a graphical version of the data.
3:58:07 PM
Mr. Wood described the modifications made to the GCA model
to calculate BOE - slides 32, and 33. He discussed slide
34. He emphasized the importance of looking at stability at
wide ranges when developing a fiscal design.
3:59:48 PM
Mr. Wood explained the production tax rate analysis for
1728 macro scenarios for combining oil and gas - slide 35.
The state can end up with a huge range of production tax
rates. The gas dilution effect is much less important at
low prices.
Mr. Wood described his conclusions from the combined oil
and gas production tax model - slide 36. He said he knew of
no other country where a government would give a producer
billions of dollars of subsidy through this type of
mechanism. He stressed that individual snapshots are
important, but represent only one particular possibility.
He suggested considering a whole spectrum of possibilities.
4:02:06 PM
Co-Chair Stedman corrected that the model was from the
Department of Revenue, not Gaffney Cline.
4:03:00 PM
Mr. Wood explained slide 37 - natural gas production tax
dilution effects impacted by reinvestment. If some of the
PTV is reinvested, the reduction in production tax paid is
significantly greater. The graph shows the impact of a 10
percent reinvestment.
Mr. Wood pointed out in slide 38 that the natural gas
production tax dilution is different depending on the
reinvestment scenario. He spoke of the difficulty of
predicting progressivity. There are many unknowns. Over a
multi-year period, the oil-to-gas ratio of the North Slope
will change as gas progressively replaces oil. Each company
will have a different oil-to-gas ratio per field.
4:05:25 PM
Mr. Wood skipped to slide 41 - the implications of combined
oil and gas production tax analysis. The analysis suggests
that the prevailing production tax system has the following
complications to address:
1. It is difficult to predict (from tax authority &
producer perspectives) and relationships between oil
and gas tax liabilities are non-linear;
2. The magnitude of combined production tax impact
caused by adding a gas production stream varies with
relative oil and gas PTVs, oil and gas volumes and
percentage of PTV re-invested;
3. Without detailed analysis (and speculative
forecasting of oil and gas prices and BOE
contributions) Alaska's production tax outcomes can
be counterintuitive (e.g. higher prices can lead to
lower tax revenues collected by the State in some
scenarios).
Mr. Wood did not think this type of structure was stable in
the longer term.
4:07:39 PM
Mr. Wood turned to slide 42 - a diagram of Alaska oil and
gas fiscal take and funds flow. It looks at what could
potentially be done to address the issue of combined
progressivity. The simplest solution is to de-link oil and
gas components.
Mr. Wood explained slide 43 - alternative drivers of gas
progressivity tax evaluated by fiscal model. The easiest
first step is to separate gas and oil. If incentives are
deemed to be needed to attract investment, the inducements
should be directed at the regressive end of the spectrum,
not into the progressivity area.
4:09:17 PM
Senator Egan asked what the deadline should be to make
changes to the production tax. Mr. Wood believed that
before May 1 would be ideal.
ADJOURNMENT
The meeting was adjourned at 4:09 PM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2010 02 24 DWood Gas AK FiscalDesign SFC.pdf |
SFIN 2/24/2010 1:30:00 PM |
Oil and Gas Production Tax Review |
| 2010 02 24 LBA Dickinson SFC Gas Oil .pdf |
SFIN 2/24/2010 1:30:00 PM |
Oil and Gas Production Tax Review |
| Wood Bio Feb 2010.pdf |
SFIN 2/24/2010 1:30:00 PM |
Oil and Gas Production Tax Review |
| Agenda 022410 pm.docx |
SFIN 2/24/2010 1:30:00 PM |
Oil and Gas Production Tax Review |