FOR IMMEDIATE RELEASE
December 1, 2015
Oil and Gas Tax Working Group Misses Opportunity to Help Reform Flawed Tax Credit Program
Huge Tax Credits Threaten to Overwhelm the Alaska Budget and Impact State Services
ANCHORAGE – Today, the Alaska State Senate Oil and Gas Tax Credit Working Group released a summary report, which includes recommendations to change the oil and gas tax credit system in Alaska. Senator Bill Wielechowski (D-Anchorage) was the only member of the Alaska Senate Democrats invited to sit on the working group and in many ways he feels the report missed the mark.
“The data presented to the working group confirms that the State of Alaska has and will continue to pay out millions more in oil tax credits that we receive in production taxes. This flawed program threatens to overwhelm our budget and threaten essential state services,” said Sen. Wielechowski. “I believe the working group missed a golden opportunity to propose significant and meaningful reforms to a program that unfortunately has surpassed healthcare and public education as the largest cost driver in the budget.”
In fiscal years 2015 and 2016, the State of Alaska is paying out approximately $642 million more in refundable oil tax credits than we receive in production taxes. In FY 2017, credits used against tax liability (predominantly going to large, still very profitable North Slope fields) are projected to skyrocket to $1.25 billion. FY 2018 credits are projected at $1.21 billion and $999 million in FY 2019.
“Unfortunately, this working group touched very little on the per-taxable-barrel credit issue during its discussions,” said Sen. Wielechowski. “Nor did this working group have the opportunity to hear from BP, ConocoPhillips or ExxonMobil, the three largest oil companies operating in the State of Alaska. How can a group propose changes to the oil and gas tax credit system without hearing from the most significant users and beneficiaries?”
Recent Securities and Exchange Commission disclosures confirm that Alaska remains one of the most profitable places in the world for the oil industry to do business. Sen. Wielechowski believes the current tax credit and deduction system virtually guarantees the oil industry a profit via massive subsidies with little in return for this guarantee when oil prices rise.
“There is no other oil jurisdiction in the world with such a massively imbalanced system as Alaska,” said Sen. Wielechowski. “If Alaska had North Dakota’s tax and royalty structure the oil industry would be paying roughly double what they are currently paying. Instead, the State of Alaska is now socializing the oil industry’s risk while privatizing the profits.”
Sen. Wielechowski sent a letter to the chair of the Senate Oil and Gas Tax Credit Working Group outlining recommendations to fix the broken tax credit system. His recommendations include instituting a higher minimum gross tax and temporarily reducing the deductible tax credits for the three most profitable fields on the North Slope.
Sen. Wielechowski is also proposing to continue to provide refundable tax credits, but with some modifications.
“There are many creative ways we could address the tax credit issue,” said Sen. Wielechowski. “We could take an equity stake in exchange for credits. We could even increase our royalty rates in exchange for credits. However, what has come out of the Senate Oil and Gas Tax Credit Working Group constitutes a missed opportunity to fix a broken system that is negatively affecting our budget and ultimately our future.”
Below is a link to Sen. Wielechowksi’s letter to the Chair of the Senate Resources Committee.
For more information, contact Senator Wielechowski at (907) 269-0120.