Consultant: Oil tax system doesn't encourage new development

Associated PressMarch 15, 2012 

JUNEAU -- A legislative consultant says Alaska's oil tax structure seems to work well as a harvesting system.

In a presentation for the Senate Finance Committee, Gerald Kepes says existing mature fields remain profitable for companies, and the state extracts maximum "rent" from a declining production base.

However, he says, this system inhibits development of new projects and resources that might help stem or reverse the trend of declining production.

Among other things, he says progressivity can have a detrimental effect on break-even prices for high-cost projects at current oil prices.

Alaska's tax structure has a base tax rate and progressive surcharge triggered when a company's production tax value hits $30 a barrel.

Industry says the surcharge eats too deeply into profits when oil prices are high and discourages new investment.

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