A committee of the Alaska House of Representatives has diluted a plan by Gov. Bill Walker to cut the state\u2019s subsidy for oil and gas drilling.<\/p>\n
As a result, the state is poised for the first time to pay oil companies more in subsidies than it receives in oil taxes and royalties.<\/p>\n
\u201c2017 will be the first year that Alaska doesn\u2019t earn positive income out of oil and gas development; that\u2019s a significant step,\u201d said Gov. Bill Walker.<\/p>\n
The Alaska House Resources Committee introduced a substitute for House Bill 247 on Saturday and continued its discussion on the proposal Monday.<\/p>\n
In fiscal year 2015, the state paid $628 million in tax credit incentives to oil companies, said Ken Alper, director of the tax division of the Alaska Department of Revenue.<\/p>\n
As oil prices fell and the state was confronted with a multibillion-dollar deficit, Walker capped the credit program at $500 million in fiscal year 2016. That fiscal year ends June 30. <\/p>\n
The cap didn\u2019t stop companies from requesting credits \u2014 it just stopped their payment.<\/p>\n
Alper said companies are expected to apply for (and receive) $700 million worth of credits this fiscal year, $200 million more than the governor\u2019s cap. That $200 million will be rolled over and added to another expected $645 million in credits in fiscal year 2017, which starts July 1.<\/p>\n
On Monday, the Alaska Department of Revenue released a report stating that Alaska will earn just $690 million in unrestricted oil revenue in FY17; a figure far below that expected for credits.<\/p>\n
The problem wasn\u2019t entirely unexpected: In December, Walker had proposed HB 247 to reform the tax credit program. Walker\u2019s original plan was to save or raise nearly $500 million with a combination of cuts and tax increases.<\/p>\n
In more than 20 hearings and 900 pages of background documentation, however, the House Resources Committee heard that Walker\u2019s plan would have negative effects on the oil and gas industry. Hiring might suffer, and North Slope production three, five or 10 years in the future could be lower.<\/p>\n
On Saturday, the committee unveiled its alternative. Instead of saving $500 million, it saves between $45 million and $60 million per year through 2019.<\/p>\n
\u201cThis is an attempt now to immediately curb that direct state support while providing some level of protection for current investments,\u201d said Rena Delbridge, an oil and gas expert who helped draft the replacement. Delbridge is a staffer for Rep. Mike Hawker, R-Anchorage, and offered her comments on Saturday.<\/p>\n
The committee version of the bill would mean almost no changes to the oil and gas program on the North Slope. More significant impacts would be felt in Cook Inlet, where lawmakers in 2010 enacted a \u201cfire alarm pull\u201d slate of tax credits to encourage gas production feeding Anchorage.<\/p>\n
Some of those credits would be allowed to lapse, others would be rolled back, and the whole Cook Inlet taxation system is scheduled for a renovation within six years.<\/p>\n
Where Walker suggested a $25 million cap on the amount of credits a company could earn in a given year, the committee version of the bill raises that cap to $200 million.<\/p>\n
Rep. Benjamin Nageak, D-Barrow, is co-chairman of the House Resources Committee and oversees a district covering the entire North Slope and Northwest Alaska.<\/p>\n
\u201cThis is a damned if we do, damned if we don\u2019t kind of thing,\u201d he explained.<\/p>\n
The oil and gas industry is being hammered by low oil prices just as much as the state is, he said. <\/p>\n
In presentations, the committee was told that at prices this low, companies actually lose money producing oil on the North Slope. They still produce because they lose less money as long as oil is flowing.<\/p>\n
\u201cWe don\u2019t want to go in and spook the money away because that\u2019s where the money comes from,\u201d he said of Prudhoe Bay.<\/p>\n
On Saturday, the consulting firm Enalytica, whom the Legislature hired to independently vet the tax credit proposal, said the $200 million cap in particular is an appropriate amount to result in the least impact on industry while still protecting the state from isolated spikes.<\/p>\n
The impact of a still-large oil and gas tax credit program on the state budget is unclear. Alper said additional documentation will be available later this week, but what is known is that HB 247 contains a special $1 billion appropriation to fund the tax credit system. <\/p>\n
Walker called for that appropriation in his version of the bill, but Alper said the committee\u2019s version means that appropriation would run out more quickly, possibly in less than two years.<\/p>\n
\u201cThe money is still there; it simply won\u2019t go as far as we thought it would,\u201d he said.<\/p>\n
The idea of spending hundreds of millions on oil and gas tax credits is also alarming some lawmakers who see the state spending lavishly even as it cuts core services and considers spending the earnings of the Permanent Fund, an act that could reduce the Permanent Fund Dividend.<\/p>\n
\u201cWe\u2019re going to have to generate those funds from somewhere,\u201d said Rep. Paul Seaton, R-Homer and a member of the House Resources Committee, about oil and gas tax credits. \u201cThat\u2019s a huge budgetary expense, and we\u2019re talking about budget cuts. Here, I don\u2019t see any budget cuts.\u201d<\/p>\n
Rep. Sam Kito III, D-Juneau, spoke even more plainly. \u201cIt\u2019s basically taking money out of Alaskans\u2019 pockets to give to oil companies,\u201d he said Monday morning.<\/p>\n
\u2022 Contact reporter James Brooks at 523-2258 or at james.k.brooks@juneauempire.com.<\/p>\n","protected":false},"excerpt":{"rendered":"
A committee of the Alaska House of Representatives has diluted a plan by Gov. Bill Walker to cut the state\u2019s subsidy for oil and gas drilling. As a result, the state is poised for the first time to pay oil companies more in subsidies than it receives in oil taxes and royalties. \u201c2017 will be […]<\/p>\n","protected":false},"author":426,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_stopmodifiedupdate":false,"_modified_date":"","wds_primary_category":4,"footnotes":""},"categories":[4],"tags":[230],"yst_prominent_words":[],"class_list":["post-28245","post","type-post","status-publish","format-standard","hentry","category-news","tag-state-news"],"_links":{"self":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/28245","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/users\/426"}],"replies":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/comments?post=28245"}],"version-history":[{"count":0,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/28245\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media?parent=28245"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/categories?post=28245"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/tags?post=28245"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/yst_prominent_words?post=28245"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}