Juneau, Alaska (KINY) - Senator Bill Wielechowski (D-Anchorage) has pre-filed legislation ahead of the legislative session, Senate Bill 14, to eliminate Alaska's oil and gas per-barrel tax credit program.
This deductible tax credit, part of Senate Bill 21 which passed under Governor Sean Parnell in 2013, provides oil and gas producers a discount on their production taxes for every barrel of oil produced based on a sliding scale, depending on the market price of Alaska's oil.
The credit ranges from $8 per barrel when the price of oil is less than or equal to $80 per barrel, to $1 per barrel when oil is $140 or more. Gov. Parnell promised that oil production would increase to one million barrels per day through the Trans-Alaska Pipeline within ten years with the passage of his oil tax reform. Instead, oil production is projected to decline to less than half that - to 470,000 barrels per day by 2024.
For fiscal year 2019, the Department of Revenue (DOR) expects the state to generate $815 million in production tax revenue while permitting over $1.2 billion in these deductions. In fiscal year 2020, that tax revenue is forecasted at $479 million, with the credits costing the state another $1.2 billion. Over the next ten years, the credits will cost the state $11 billion.
"These tax breaks were given to oil and gas producers to boost oil through the Trans-Alaska Pipeline, but have simply not delivered as promised. And production in Alaska is still projected by the Department of Revenue to drop in the future," said Sen. Wielechowski. "Blaming low oil prices is not accurate either, because, in Texas and North Dakota, where oil companies pay much higher tax rates and royalties than in Alaska, oil production has respectively increased 2 million barrels and 500,000 barrels per day since 2013. Alaska's per-barrel credits are an unaffordable giveaway and have demonstrably not increased production as we were promised. Instead, they have devastated our treasury."
While most major producers do not publicly detail their Alaska profits, a recent ConocoPhillips Security Exchange Commission (SEC) report showed that as of the third quarter 2018, the company made $1.29 billion in profits in Alaska alone - more money than it had from all of its operations in the Lower 48 combined.
On a per-barrel of oil equivalent basis, the ConocoPhillips third quarter SEC filing shows that Alaska is the most profitable oil and gas region in the world - by far, with the company having made $26.25 per barrel in profits in Alaska versus $12.17 per barrel in the Lower 48 and $11.68 per barrel globally.
"Alaska is still facing a significant budget gap, and politicians are cutting Alaskans' Permanent Fund Dividend to balance the budget while continuing to provide these lavish benefits to some of the most profitable corporations in the world. This is a subsidy that Alaska can simply not afford anymore," said Sen. Wielechowski.
Senate Bill 14 is scheduled for formal introduction on Jan. 15, when the 31st Legislature convenes.