Alaska Passes Legislation to Support Energy Industry Projects

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The 2013 Alaska Legislature passed three significant pieces of legislation and appropriated hundreds of millions of dollars for projects that will support the energy industry before it adjourned in April, with a Republican Governor and Republican-controlled Legislature aligned on the need for pro-industry oil and gas tax changes and further encouragement of State-sponsored projects to meet in-State energy needs considered.

Tax Change – SB 21 -

Senate Bill 21, introduced by Governor Parnell, cut production taxes by an estimated five billion dollars through 2019 based on $109-$118 barrel oil. Alaska’s current production tax (ACES) has a base tax rate of 25% which progressively increases when oil is more than $30 per barrel (0.4% per $1 above $30 net and 0.1% per $1 above $92.50 net). Critics of “progressivity” argue that because prices have been high since ACES became effective in 2006, producers have shifted investment dollars that would have normally flowed to Alaska to other jurisdictions with lower tax rates. ACES’ supporters argue that production decline rates have actually slowed since 2006 due to ACES tax credits and other incentives provided for in-fill drilling and other production enhancement techniques and that only minor adjustments to progressivity were necessary or desirable.

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