Homer Alaska - Business

Story last updated at 12:37 PM on Wednesday, October 26, 2011

Study criticizes Alaska's oil tax structure, as well as legislation that would change it


FAIRBANKS — A study by an independent oil and gas consultant is critical of Alaska's oil tax structure, but also finds flaws in legislation that proposes to make changes.

The Alaska Legislature paid $32,250 for access to the study and five others by oil and gas consultant Pedro van Meurs.

The Fairbanks Daily News-Miner reported the study is covered by copyright but van Meurs allowed reporters to review it.

Among "serious shortcomings" of the current tax structure are inadequate incentives for extracting heavy oil and natural gas, the study said. Alaska in recent years increased oil production taxes as Canada and Greenland were lowered, the study said.

Supporters of a tax overhaul contend other drilling locations have surpassed Alaska as destinations for investment. However, van Meurs also criticized proposals for change.

Two bills before the Alaska Legislature would decrease the state take by 12 to 14 percent but keeps Alaska "rather uncompetitive" in exploration for heavy oil and shale oil, according to the study.

It also criticizes charging different rates for old and new fields, as proposed in a bill from Gov. Sean Parnell. The study calls that unproductive.

Rep. Mike Hawker, R-Anchorage, who has sponsored another proposal, said the study underscores the need for change. The consultant, however, assumes new oil tax bills under review are designed to be a broad solution, Hawker said. Future legislation, he said, will address natural gas and heavy oil.

"It was never intended to be a global solution to our fiscal regime," Hawker said of current bills. "It was simply a targeted remedy to one known problem."

Revenue Commissioner Bryan Butcher said the governor's bill similarly was not aimed at solving all the problems Alaska faces.

Van Meurs strongly criticized offering substantial tax credits for exploration. That could encourage oil producers to explore in marginal areas with an eye toward a state subsidy offsetting costs.

Butcher said van Meurs and Parnell disagree about exploration tax credits. Parnell, Butcher said, believes his bill would result in greater industry investment.