Oil tax credit bill passes House

Posted: Tuesday, May 20, 2003

JUNEAU (AP) Gov. Frank Murkowski's proposal to provide tax credits for companies that explore for oil in Alaska passed the House on Monday.

The bill provides a severance tax credit of up to 40 percent of the cost of exploration wells. Administration officials estimate the credits could cost the state about $50 million a year. At most, they estimate the bill could cost $100 million a year.

Supporters said they expect the state's expense will pay dividends in future years by increasing both the flow of oil through the trans-Alaska pipeline and revenues to the state budget.

''This is another incentive for this industry to get out there, drill, find oil, help us with our treasury and generate good jobs,'' said Rep. Vic Kohring, R-Wasilla.

Rep. Beth Kerttula, D-Juneau, agreed that an incentive to spur exploration is a ''great idea,'' but said she did not have enough information to be sure the program is structured in a way that is the best policy for the state.

The proposal was introduced just a week ago and some lawmakers complain they have not had time to study it carefully enough before being asked to vote on it.

The bill would provide a severance tax credit of 20 percent of the cost of exploration wells drilled more than three miles from an existing well. Explorers would get a 40 percent credit for wells drilled more than 25 miles from existing production facilities.

The tax credits would apply to exploration work done between July 1, 2003, and July 1, 2007. Credits could be sold by companies that don't pay severance tax to those that do pay. And the credits could be applied to tax bills starting July 1, 2004.

Administration officials do not expect to see any new money from oil discoveries spurred by the credit during the next four years. But ultimately they predict the program will bring more oil into production and bring more money to the state treasury.

The bill also would grant royalty relief to platforms nearing the end of their productive life in Cook Inlet.

That section of the bill would allow the state's share of oil produced called a royalty payment to drop from 12.5 percent to as low as 5 percent on the inlet platforms, depending on how much their production declined.

The House approved the measure 32-4, with Democrat Reps. Sharon Cissna, Les Gara, David Guttenberg and Kerttula voting against it.

The bill has already passed the Senate, but because the House made changes in it, the two sides will have to agree on a compromise.

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