Savings on tax credits for oil and gas not as high as proposed

A bill to revise oil and gas tax credits from the House Resources Committee includes only a fraction of the savings Governor Bill Walker proposed.

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The Department of Revenue estimates the bill would save the state roughly 160 million dollars over the next three years. That compares with more than a billion dollars in savings under Walker’s proposal.

The committee rejected a series of amendments Tuesday that would have raised costs for oil and gas companies.

For example, Homer Republican Representative Paul Seaton proposed cutting the share of losses that North Shore producers can receive. The Net Operating Loss tax credits would have fallen from 35 to 25 percent.

Anchorage Democratic Representative Andy Josephson supported the amendment, which was defeated three to six.

“The credit system we’ve devised is not sustainable in this economic climate and this would be a way to rein it in,” said Josephson.

But Rena Delbridge said the credits help smaller and newer companies operate on the North Slope. She’s an aide to Anchorage Republican Representative Mike Hawker who worked on the bill.

“The Net Operating Loss credit is also, can also be thought of as a part of the fundamental tax calculation, in the sense that the state wants you to keep spending money, even if you are losing money,” Delbridge said. “Because that spend is potentially that future production.”

Walker’s plan would have prevented companies from using past losses to reduce their taxes below the minimum, like they can now. And it would have raised that minimum tax from 4 to 5 percent.

The House Resources bill drops those provisions, and also scales back Walker’s proposal to cut tax credits.

The debate over the bill is happening the same week the state forecast that it will pay out more in oil and gas tax credits next year than it will receive in royalty revenue – for the first time.

Despite the gulf between Walker’s proposal and the committee bill, Tax Division Director Ken Alper credited thAndrew Kitchenmane Resources Committee with its work over more than 20 hearings on the bill.

“It was a respectful process. It was informative,” Alper said. “They fixed a number of the technical issues that were in our original bill, and that makes things easier going forward. And even if we disagree with where they went on some of the larger dollar-value changes, we’re going to continue the conversation.”

The bill must go through more steps before it reaches Walker’s desk. Next up is the House Finance Committee.

And it will face scrutiny in the Senate Finance Committee. Last year, Soldotna Republican Senator Peter Micciche was a member of a working group that recommended the state prevent companies from paying less than the 4 percent minimum.