Opinions

Owed tax credits aren’t just about oil companies. Service companies depend on them as well.

In 2015, Gov. Bill Walker vetoed hundreds of millions of dollars in owed oil exploration tax credits. This not only negatively affected many oil companies, but also many oilfield service companies in Alaska. When an oil company explores, they hire service companies to provide hundreds of services and products. These service companies are often small, Alaska-owned companies. They are directly affected by these decisions. These companies don't directly receive the tax credits, but they depend on the companies that do.

These service companies provide drilling contract services, casing and tubing running services, welding and fabrication, wireline and slickline services, remote camps and catering, OCTG pipe and products, downhole jewelry, communication support, ice road construction, perforation and stimulation work, roustabout labor, trucking, chemicals, fuel and much more. These services account for thousands of jobs and payroll dollars for Alaskans.

No one is disputing these credits are owed. The oil companies who engaged in exploration did so on the full faith and credit of the state of Alaska. They spent or borrowed money to explore for oil based on a system of credits that the state created. By vetoing these credits and not fully funding the credit payments, many have lost faith in the state of Alaska. This kind of uncertainty is bad for business.

There is a legitimate conversation to be had about exploration tax credits. Incentivizing exploration does not always lead to production, which is the goal. Since Gov. Walker vetoed the tax credits, the Legislature has eliminated exploration tax credits. But this still leaves the nearly $1 billion in credits that are owed to independent oil companies like Accumulate Energy Alaska, Caelus, Bluecrest, Armstrong Oil & Gas, and Furie.

[Oil company says it likely can't continue to drill unless state pays tax credits]

These companies are waiting to be paid on money they already spent. They are having to refinance loans and pay interest while they wait for the state to decide how and when they will pay them the money they are owed. This affects service companies because many of these oil companies can't do more work until they get paid the money the State owes them.

With the price of oil holding steady around $65 a barrel and new discoveries waiting to be further explored, there is a lot of work to be done in Alaska. Paying these tax credits will not only be good for the oil companies who are owed the money, but also for the oilfield service companies who rely on these companies for work. Oilfield service companies employ thousands of Alaskans with high paying jobs.

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This should have never been an issue. It has caused uncertainty and made many question the faith and credit of the state of Alaska. The state needs to pay these tax credits and restore the faith it once had. The sooner the state lives up to its obligations, the sooner Alaskan companies will be putting Alaskans back to work.

Jim Wohlers is the general manager of GBR Oilfield Services and Jeff Landfield is business development manager.

The views expressed here are the writer's and are not necessarily endorsed by the Anchorage Daily News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser.

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