The State Department of Natural Resources top priority is increasing the amount of oil moved by the Trans-Alaska Pipeline. That was the message of D.N.R. Commissioner Dan Sullivan in an address to the Fairbanks Chamber of Commerce on Wednesday.
Pipeline throughput is currently below 700,000 barrels a day, and declining about 6 percent per year. Sullivan says Alaska is suffering compared to other oil producing areas.
Sullivan says the Governor and D.N.R. have a five-part plan to increase North Slope oil production. The strategy includes more efficient permitting, partnerships with industry and other governments, promotion of Alaska oil, and incentivizing development of nonconventional sources like shale, but he says the cornerstone is state tax reform. The governor and industry were unsuccessful in pushing oil tax cuts through the legislature last session, and Sullivan acknowledges the issue is complicated.
The current tax regime includes breaks for investment and a tax rate that increases at high oil prices. Fairbanks State Senator Joe Paskvan questions the need for additional tax breaks. Paskavn, who attended yesterday’s address by Commissioner Sullivan, says the state is already doing a lot to encourage oil investment.
Paskvan says the state provided oil companies with between $800 million and $900 million in tax credits in FY 11. He says the progressivity aspect of Alaska’s oil tax can create an unhealthy relationship between the state and industry at high oil prices, but that the tax system needs to be considered as a whole.
Paskvan, who co-chairs the Senate resources committee, has been pressing the state for a more complete accounting of the impact of Alaska’s tax system on industry. He says he’s getting closer to numbers needed for a better understanding and debate of the tax issue.