House Acts to Bring Oil & Gas Drilling Exploration to Remote Areas
HB 276 provides credits for exploration and drilling in certain basins
Tuesday, April 10, 2012, Juneau, Alaska – The Alaska House today gave approval to incentivize drilling and exploration in certain remote areas of Alaska.
House Bill 276, by Rep. Steve Thompson, provides tax credits and incentives for oil and gas in frontier basins that is brought to market, and where local communities in the area who struggle with the high cost of energy could benefit. The bill identifies six specific geologic areas that qualify for exploration: Kotzebue and Selawick Basins; Nenana and Yukon Flats; Emmonak; Glennallen and Cooper River area; Egegik; and, Port Moller.
The bill would limit the number of credits awarded to minimize the cost to the state. Exploration well credits are limited to four wells in the areas identified with no more than two wells in any one area. The maximum credit would be 80 percent of total exploration expenditures or $25 million, whichever is less.
In addition to drilling and exploration, HB 276 would provide seismic credits to attract new geophysical analysis. These would be limited to four total projects with one per designated areas. The credit for exploration would be $7.5 million or 75 percent of total costs, whichever is less.
HB 276 also carries a requirement for the credits that all exploration drilling and seismic data collected must be turned over to the state and made available for public release within two years of receiving credit. All credits created in the bill would apply to work performed after June 1, 2012 and before 2016.
“Remote frontier areas are difficult to reach, face logistical obstacles and have challenges getting hydrocarbons to market,” Thompson, R-Fairbanks, said. “Providing these meaningful credits and incentives will attract explorers willing to take the risk and explore in remote areas.”
For explorers who reach new commercial production, a four percent tax rate will apply for seven years after the start of production. After seven years the tax rate reverts to current statute
HB 276 passed by a vote of 35-2 and now moves to the Alaska Senate for consideration.