Petroleum explorers cash in tax credits

The payments are designed to give explorers an incentive to hunt and develop oil and gas deposits in Alaska.

For fiscal year 2009, which ended on June 30, the state distributed the $193 million to 15 "new" oil and gas explorers, the department said.

By new, the state means companies that aren't yet producing any oil or gas, said state Revenue Commissioner Pat Galvin. He said he couldn't by law reveal the names of the individual companies.

Galvin said fiscal year 2009, is the first full year the state has reimbursed companies for their credits under ACES -- Alaska's Clear and Equitable Share, the oil production tax change Gov. Sarah Palin pushed through the Legislature in 2007.

The credits are essentially advance rebates on future taxes the companies will owe if they begin production. Companies present proof of their spending to the state to build tax credits and swap them for cash.

State officials recognize that a big challenge for oil and gas explorers is the huge expense they must risk upfront before they ever produce the first barrel of oil, Galvin said. By allowing them to cash in tax credits with the state, the belief is it helps encourage exploration and investment.

"The number shows there's a lot of activity going on out there," Galvin said of the $193 million.

"In addition, hundreds of millions of dollars in ACES tax credits were taken by companies already producing oil and gas in Alaska who have made new additional investments," the department said. "These tax credits were used by the companies as offsets to their tax liabilities, and did not require payment from the state."