JUNEAU, Alaska (AP) — Most current oil and gas tax credits in Alaska would be phased out by 2020 under a draft rewrite of legislation pending in the House Rules Committee.
The draft had yet to be formally introduced or heard by the committee, which took possession of the bill after a prior version appeared destined to fail on the House floor. The inability for the House to come to an agreement on changes to a system that has become a major budget cost helped send lawmakers into overtime last week.
The draft rewrite was met coolly Tuesday by some Democrats, who don’t think it goes far enough in making changes, and from the head of the Alaska Oil and Gas Association, who said she couldn’t envision a scenario under which her group would support the draft.
Documents for the draft rewrite were posted on the legislature’s website. A meeting was tentatively set for Wednesday.
Resolution on credits is seen as key to making further progress on the budget and revenue measures as lawmakers try to deal with an estimated $4 billion budget deficit exacerbated by low oil prices.
A summary of the rewrite states that in addition to phasing out nearly all credits by the start of 2020, a tax break for North Slope oil produced from newer fields would be limited to 10 years once regular production starts, rather than being a timeless benefit. That is a longer time frame for that benefit than was proposed in an earlier House rewrite of Gov. Bill Walker’s bill or the version pending in the Senate.
Remaining credits would be for an area south of the North Slope and outside of Cook Inlet, known as “middle earth,” which are set to expire in 2022.
The draft, among other things, proposes to change net operating loss credits on the North Slope to lease expenditure deductions that can be carried forward if not used in a given year for companies in pre-production development or producing more than 20,000 barrels per day, according to the summary. It also calls for a legislative working group to study and make recommendations on an oil and gas tax structure for Cook Inlet and the middle earth region that would take effect in 2019.
Sen. Bill Wielechowski, D-Anchorage, called the draft a starting point. “I think there’s a long way to go, though,” he said. There needs to be an examination not only of credits but also of the state’s “deeply flawed” oil tax structure, he said.
Kara Moriarty, president and CEO of the Alaska Oil and Gas Association, said the industry is losing money.
“If these policies go into place, there will be a change in behavior. There will be an impact to companies across Alaska and you will see less investment and less production. Our position has not changed whatsoever,” she said.
Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.