Tax credits reduced for oil and gas companies

The House Resources Committee unveiled its version of an overhaul of the state’s oil and gas tax credits.

The new version removes one of the key changes proposed by Governor Bill Walker – raising the minimum tax paid by companies from 4 percent to 5 percent.

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The bill would trim the amount of tax credits paid to companies operating in the Cook Inlet.

But Homer Republican Representative Paul Seaton says the new version would leave credits for companies operating on the North Slope unscathed.

“You know, it’s a huge budgetary expense and we’re talking about how we need to do budget cuts in here. I see almost no budget cuts.”

But Rena Delbridge, an aide to Anchorage Republican Representative Mike Hawker, says the sponsors of the new version were concerned about cutting credits deeper. Delbridge worked on the changes.

“The potential impacts to industry of immediate and dramatic changes, in order to resolve a short-term – hopefully short-term or intermediate-term – budget problem, could have fairly significant effects to our production in three years and in five years and in 10 years. “

Walker had proposed eliminating credits based on how much companies spend on drilling and exploration. But he would have allowed companies to continue to get tax credits based on their operating losses.

The new version would scale back both types of credits – for spending and for losses — but wouldn’t eliminate either type.

Walker’s state budget proposal included 500 million dollars from the tax changes. Until a fiscal analysis is complete, it’s not clear how much less the state budget would receive from the committee’s changes.

Ken Alper, state Tax Division director, says the changes will affect the state’s ability to balance its budget. He noted that eight other bills designed to raise revenue haven’t passed.

Walker’s expected to announce today that state revenue hasn’t been meeting forecasts, further deepening the budget problem.

The bill also would establish a legislative working group that would make recommendations on broader changes to the tax system for companies in the Cook Inlet and the area south of the North Slope known as “Middle Earth.”

These recommendations would be due in time for next legislative session.