Crunch time, industry at risk. Under a rewrite of HB247, currently pending in the House Rules Committee, current oil and gas tax credits in Alaska would be phased out by 2020. A summary of the rewrite states that in addition to phasing out nearly all credits by the start of 2020, a tax break for North Slope oil produced from newer fields would be limited to 10 years once regular production starts, rather than being a timeless benefit. Democrats don’t think it goes far enough in making changes and representatives from the Alaska Oil and Gas Association said there isn’t a scenario under which they would support the draft. Four years from now, will lawmakers look back on this decision and admit they cost the state billions in private investment, new production, more revenue, and jobs for thousands of Alaskan families? Headlamp is curious when exactly lawmakers will realize their mistake if this rewrite passes.
Cost-cutting in tough times. Thanks to a strong performance from the refining and marketing side of its operations, BP cushioned the hit from low oil prices in the first quarter. Though the company reported a 79 percent slide in earnings, its share price spiked 4.5 percent higher Tuesday as the result was better than anticipated by markets. BP reported that its underlying replacement cost profit — the oil industry standard, which excludes non-operational items and the value of oil inventories — dropped to $532 million from $2.58 billion in the first quarter of 2015. “We think the key takeaway is the strong message on dividend sustainability today,” brokerage firm Bernstein said in a statement. “BP is clearly delivering on its cost reduction plans which are offsetting commodity price weakness and delivering earnings and cash flow ahead of expectations.” Though that’s quite a precipitous decline, the result was about $100 million better than analysts had forecast. Industry leaders are doing all they can to keep costs low and find ways to provide cheap reliable energy. As Headlamp has repeatedly stressed, Alaskan policy makers could learn a thing or two from the private sector on how to respond to low oil prices.
Sen. Lisa Murkowski continued a successful week of highlighting the need for Alaska’s oil and gas industry in a piece by World Oil. “Oil and gas prices are low today, but they won’t be low forever. As oil and gas production is heavily capital intensive, investments must be made well in advance for projects to come online when increased production is needed,” Murkowski said. “When oil prices reached all-time lows in Alaska, the state worked diligently to ensure that our public policy remained attractive to resource investment. That should be our goal across the nation: to ensure that America remains an attractive place to produce the resources we need, and will use, right here at home.” Headlamp couldn’t agree more, Senator.
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Draft bill would phase out most oil and gas credits
Associated Press, Becky Bohrer, April 26, 2016
New oil tax draft emerges from Alaska House, adds millions to savings
Alaska Dispatch News, Nathaniel Herz, April 26, 2016
Obama drilling plan called ‘troubling’ job killer
Washington Examiner, April 26, 2016
BP beats expectations on downstream results
Alaska Journal of Commerce, Danica Kirka, April 26, 2016
Murkowski highlights need to boost U.S. oil, gas development in low price environment
World Oil, April 26, 2016
Latest oil and gas tax credit aimed at gaining majority
Alaska Public Radio News, Danice Kirka, April 26, 2016