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Energy

Another Cook Inlet gas producer says state’s limited tax-credit payments prevented drilling this year

  • Author: Alex DeMarban
  • Updated: October 26, 2017
  • Published October 26, 2017

Another independent oil and gas company in Alaska is blaming the state's scaled-back tax-credit payments for upsetting drilling plans.

Furie Operating Alaska said it has conducted "substantial well and pipeline work" at its offshore Kitchen Lights Unit in Cook Inlet this year, according to paperwork filed Oct. 6 with the Alaska Oil and Gas division.

But Furie hasn't been able to drill "additional exploration or development wells" this year because of reduced tax-credit payments from the state, according to its development plan for the unit in 2018.

The state government, slammed with a $2.5 billion deficit brought on by low oil prices, has in recent years paid oil and gas operators the bare annual minimum allowed under the tax credit program.

The Legislature appropriated payment of $77 million to oil and gas companies this year, but that left $390 million unpaid to the industry, Furie's plan said.

Small companies that have sunk large sums into oil and gas fields say they expected full payment and need the money to pay bills and attract financing to keep working.

Lawmakers ended the tax-credit program this year, which often paid up to 65 percent of an explorer's costs. The state expects to keep making payments for years.

Caelus Energy Alaska, BlueCrest Energy and Cook Inlet Energy have also blamed reduced state payments under the cash-credit program for stopping projects or hurting fundraising in the last year.

Skeptics have said the oil companies should have been familiar with the law and known the state might not always pay in full each year, as it did before Alaska's financial fortunes crumbled.

Limited state payments for three years have hurt Furie's plans, the plan said. Furie has invested hundreds of millions of dollars into the Kitchen Lights field, and has "substantial credits in the queue" awaiting payment from the state.

An exploration or development well that Furie had initially proposed drilling this year will be pushed off until the 2018 plan.

Bruce Webb, vice president at Furie, said in an email the company will not comment about the plan.

Texas-based Cornucopia Oil and Gas, which owns Furie, received $40 million in tax-credit payments in 2016. That represents most of the $73 million paid to the industry that year, the state reported in May.

How much Furie's parent company received this year is not publicly known. The state won't release details about the 2017 payments made to each company until May.

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