- Associated Press - Thursday, January 29, 2015

JUNEAU, Alaska (AP) - Legislative consultants this week suggested that it may be wise for lawmakers to examine their approach to creating incentives for oil and gas development from Cook Inlet.

The issue of oil and gas tax credits received renewed attention earlier this month, when Gov. Bill Walker wrote an opinion piece that said Alaska is projected to pay about $100 million more in oil and gas production credits this year than it collects in production taxes.

State revenue officials have said the $625 million in so-called refundable credits referred to in that piece are primarily for small explorers or those developing new oil and gas fields that have no tax liability. Revenue Commissioner Randall Hoffbeck has said the credits are split pretty evenly between the North Slope and Cook Inlet.

Consultants from the firm Enalytica, in a report accompanying their testimony before the Senate Finance Committee on Tuesday, said that some small producer credits are slated to expire on Jan. 1. The report said that is because in passing an oil tax overhaul in 2013, the legislature decided not to extend those credits.

But that will not affect Cook Inlet, where the report said producers largely pay no oil production taxes and a low, fixed rate on gas production. The report said a pre-2006 tax regime largely still holds there, along with credits.

Given the state’s budget situation, it may be worth looking at whether some of the same benefits that those credits provide to companies in Cook Inlet could be given in a different way, the report suggested.

Sen. Peter Micciche, R-Soldotna, and a member of the committee, said the energy outlook in south-central Alaska, which benefits from Cook Inlet production, is getting better. But he said now is not the time to change the state’s approach to Cook Inlet.

Production there helped alleviate what had been a crisis mode for much of Alaska’s population, he said in an interview. The state should continue on its current course until it knows those energy supplies are secure, Micciche said.

Sen. Bill Wielechowski, D-Anchorage, said it’s worth evaluating the state’s approach to Cook Inlet credits.

“I think we’ve got to get to that point where, if it’s uneconomical, that’s when you get the credits,” Wielechowski said. It is not smart policy to give credits to companies if they don’t need them, he said.

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