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Morning Headlamp - Walker starts special session on the wrong foot


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Gov. Bill Walker unveiled proposals for a new 3 percent statewide sales tax and two oil-tax increases as part of his latest deficit-reduction package, released at the start of the Legislature's second special session of the year yesterday. Walker introduced the same income-tax legislation again yesterday to be considered during the special session, as well as a separate omnibus tax bill that increases existing charges on alcohol, cigarettes, commercial fishing, mining and motor fuel. The new oil tax proposal would block all companies on the North Slope from receiving a tax credit tied to losses. The credit is projected to cost the state hundreds of millions of dollars if oil prices track with the Walker administration's forecast.

 

Patrick Galvin, commissioner of Revenue (2006-2010) and current chief commercial officer for Great Bear Petroleum, and Marty Rutherford, commissioner of Natural Resources (2002, 2006, and 2016), penned an op-ed in the Alaska Dispatch News calling on the legislature to override the governor's veto of oil tax credits. According to the former officials, "We see the governor's veto of the tax credits as one of the largest self-inflicted injuries in the state's history. We strongly support the governor's efforts to reach a sustainable fiscal system as well as efforts to reform the oil and gas production tax system to provide a better balance between state revenue and company profits; however, we must avoid doing excessive harm to the state's long-term interests during the political fight to achieve these goals." Headlamp applauds the former commissioners' message; Alaska cannot afford to sacrifice its economic future via short-sighted policy.

 

Headlamp looks to our peers in Alberta and their efforts to strengthen their oil and gas economy. The provincial government announced Monday it is revamping drilling incentive programs for the hard-hit oilpatch, as Alberta continues to overhaul its royalty system. The move, part of the NDP's review of oil and gas royalty rates that began last year, will see the province introduce two new programs to encourage exploration and investment, replacing initiatives established by the former Progressive Conservative government. The new Enhanced Hydrocarbon Recovery Program seeks to maximize production from existing oil and gas plays. Under the new policy, projects must target plays with large resource potential but high costs. They must also be in an early stage of development and generate incremental revenues for Albertans. Approved wells will pay a flat five percent royalty until total revenues equals those wells' total cost allowances. "These applications are going to have to show that it's going to create more jobs, more rigs and more resources for Albertans," McCuaig-Boyd added.

 

Disappointing start to special session. According to a Fairbanks Daily News Miner editorial, "The second special session this year and the fifth in this Legislature's term got started with a day similar to many others in the special sessions that have come before: minutes-long floor sessions in the House and Senate with debates about whether a motion was out of order, huddled caucus meetings and prompt adjournment for several days. If the Legislature feels the same urgency in dealing with Alaska's multibillion-dollar budget deficit as Gov. Bill Walker and much of the state's citizenry, its members do a credible job of hiding it."  Headlamp applauds the News Miner for pointing out the folly of Reps. Scott Kawasaki and David Guttenberg  who continue to mislead  the public in their insistence that the state should take back more oil tax credits from producers. "This argument, doesn't acknowledge that only a small fraction of the budget gap can be closed by ending credits"

 

Alaska gas producer Furie Operating plans to test deep oil prospects in Cook Inlet that lie below gas producing reservoirs, a company official said yesterday. Vice President Bruce Webb said KLU-4 encountered gas in several intervals at depths between 6,000 feet and 10,000 feet in the Sterling and Beluga formations when it was drilled two years ago.

 

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First Reads

Alaska Gov. Walker proposes statewide sales tax, oil tax increases to kick off special session
Alaska Dispatch News, Nathaniel Herz, July 11, 2016

Legislature must override governor's veto of oil tax credits
Alaska Dispatch News, Patrick Galvin and Marty Rutherford, July 12, 2016

Special session starts with a whimper: Despite crisis point for state, little action in Legislature on budget
Farbanks Daily News Miner, Editorial, July 12, 2016

Alaska independent plans deep Cook Inlet oil test
Platts, Tim Bradner, July 11, 2016

EIA projects rise in U.S. crude oil and other liquid fuels production beyond 2017
Oil and Gas 360, July 11, 2016

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