As the House Majority proceeds with HB 111, Headlamp wants you to know the facts.
- Why should the state be giving cash to oil companies? Cashable credits were part of Alaska’s tax system intended to incentive discoveries through exploration, development and production. The majority of those credits were repealed last year in HB 247. There is only one remaining cashable credit on the Slope; the net operating loss credit is cashable for companies with less than 50,000 barrels per day. Exxon, BP, ConocoPhillips and Hilcorp are NOT eligible for those credits.
- Is it fair for us to be giving them cash when they are paying zero production tax? If production tax was all they paid, it wouldn’t be. But they also pay corporate income tax, royalties to the permanent fund and local property taxes.
- Why wasn’t there any new investment after SB 21? There was. The activity listed below came from just one company*:
- Two new rigs added to the Kuparuk rig fleet
- Two new-build rigs delivered in 2016
- New drill site at Kuparuk
- Sanctioned 18 additional wells at Alpine CD5
- Sanctioned Greater Mooses Tooth 1 in 2015
- Permitting Greater Mooses Tooth 2
- Willow discovery and acquisition of 737,000 state and federal acres in December 2016 lease sale
- Raising the minimum tax from 4 to 5% is a 1% increase; what’s wrong with that? It’s actually a 25% increase for some companies and a 100% increase for others who aren’t paying production tax yet and ran the economics of their project based on 4%.
- Why should we give out cash credits when we don’t know what we are getting in return? From FY 2007-2015 the state collected $62.1 billion in total petroleum revenue vs. paying out $3 billion in cashable/refundable credits to North Slope and Cook Inlet producers.
- ConocoPhillips makes more money in Alaska than anywhere else in the world? In Alaska COP is about 100% oil. Most other places its investments are about 50/50 oil/gas. As low as oil prices are now, gas prices have been severely depressed for many years. Any place that is all oil will automatically do much better than a place that is half oil and half gas, regardless of taxes. This was explained repeatedly in the SB 21 debate to legislators, including Rep. Gara who continues to misrepresent the information.
- Why should we try to extend the life of legacy fields like Prudhoe? Because it can provide additional revenue to Alaska in the $5 billion – $50 billion range. When Prudhoe came online 40 years ago, we thought total recoverable oil would be about 9 billion barrels. We’ve produced 12 billion and we think there is at least another 2 billion barrels to recover. Prudhoe is still a huge field.
- The oil companies make billions in profits and the state doesn’t. Is that fair? The state always receives the largest share – and a positive share even when industry is negative. See chart below, courtesy of ConocoPhillips.
*As presented to the House Finance committee on 3/2117