Thursday, May 23, 2013

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Tax Plan Not Clear on Shale Oil
By Matt Buxton - Fairbanks Daily News-Miner / mbuxton@newsminer.com


JUNEAU — The introduction of Gov. Sean Parnell’s oil tax cut this week sparked a strong outcry from Democrats who say it’s another giveaway that endangers state services, but it’s also prompted a wait-and-see approach for people keeping a close eye on what could be Alaska’s next oil boom, shale oil.

Much of the initial response from both sides of the issue has focused on the taxes impact in the traditional big oil producers on the North Slope, but some lawmakers are interested on how the new system could impact the independents that are looking at Alaska’s vast remaining oil supply.

Sen. Bert Stedman, R-Sitka, was one of the skeptics of last year’s oil legislation. Speaking to reporters after Parnell’s State of the State address Wednesday, Stedman said he wants to see a reworked oil tax structure that is fair to producers and the state, but said increased oil production will largely come from new sources such as shale oil.

“My concern is declining oil production issues,” he said. The reason we have advancing oil production in North Dakota, California and Texas is technology changes and shale oil. That’s what’s driving that. We have the source rock for shale oil for the biggest oil reservoir in North America, one of the top 10 most prolific oil fields in the world.”

Stedman, as well as others such as former Fairbanks Sen. Joe Paskvan, argue the major oil fields are in decline for a slew of issues outside of the tax system. They say issues such as water handling, bottlenecking and the physics of an aging oil field are bigger factors to the 5 to 6 percent decline than anything in the tax system.

Stedman said the route to boosting oil production will be to incentivize oil production from new fields and new sources.

“When we eventually get to the point to crack that nut, we’re going to have huge increases in production for a decade,” he said.
Joe Balash, the deputy commissioner for the Department of Natural Resources, said the legislation’s benefits could be utilized by companies looking to develop the new resources.

“The new system would make it easier to target unconventional oils like shale, heavy, and viscous. The Gross Revenue Exclusion (a measure that would reduce the effective tax rate from 25 percent flat tax to 20 percent) would be available to most of those resources; the incentive itself would only kick in if they actually achieved production,” he said.

Representatives of companies involved in developing Alaska’s shale oil resources and bringing new fields online did not respond to requests for comment on the new oil system. DNR

Commissioner Dan Sullivan expressed interest in the issue and said he expects the Legislature to take a good look at it during the session.

Contact staff writer Matt Buxton at 459-7544 or follow him on Twitter: @FDNMpolitics.