Senate Resources Committee Moves Oil Tax Legislation
Amended Version of Senate Bill 192 now heads to the Senate Finance Committee
JUNEAU-This afternoon, members of the Senate Resources Committee voted to move an amended version Senate Bill 192 out of committee. The committee substitute for SB192 makes significant changes to the state's oil and gas taxes including lowering the rate and cap for progressivity, rewarding increased production, establishing a minimum tax, creating an oil information system, and separating oil and natural gas taxes.
SB192 lowers both the rate of progressivity and the cap on progressivity. Progressivity will still be triggered when the price of oil is above $30 per barrel in production tax value (PTV), but will now be .35% per dollar increase in the production tax value instead of .4%. At $101.43 per barrel PTV, the progressivity rate will drop to .1% until oil prices reach $201.43 per barrel PTV. Under this bill, when the price of oil rises above $201.43 in PTV, progressivity is capped. Previously, the cap wasn't reached until oil reached $342.50 a barrel PTV. Initial calculations from the Department of Revenue indicate that this reduction will result in about $200 to $250 million per year in lost tax revenue to the state. The goal of this portion of the bill is to return the "upside potential" to the industry at high oil prices.
Second, SB 192 provides a tax "allowance" to companies that increase their oil production from one year to the next. The allowance would be equal to a $10 reduction in their production tax value for each new barrel produced. New fields would automatically receive the break for their first year of production and any subsequent years in which they ramp up production.
Third, SB 192 reinstitutes a 10% tax on the gross as a minimum tax to ensure Alaska's oil taxes are durable in a low price environment. Right now, at low oil prices (e.g., under $40/barrel), Alaska gets zero production tax, depriving Alaskans of a fair share of the benefits of producing their oil and gas. The goal of this provision is to protect the state treasury when oil prices are low.
Fourth, SB 192 calls for the Alaska Oil and Gas Commission (AOGCC) to develop an electronic Petroleum Information Management System that will contain public information currently gathered by the commission and the Departments of Revenue, Natural Resources and Labor and Workforce Development. The system will consolidate all available, public oil and gas information that is currently scattered among several agencies.
Finally, SB192 separates oil and natural gas for purposes of calculating the production tax. Under this legislation, the progressivity surcharges for oil and Cook Inlet and in-state gas would be calculated together, but distinctly from export gas, instead of the current practice on all oil and gas combined.
SB192 now heads to the Senate Finance Committee.
For more information, please contact Jeff Stepp in Senator Paskvan's office at 907-465-3709.
Posted: March 4, 2012