Alaska group prepares initiative to increase ANS oil tax

A group of Alaskans launched an initiative to raise the state’s tax on oil produced above 68° latitude north that reached more than 40,000 b/d in the previous calendar year and more than 400 million bbl of total cumulative production.

A group of Alaskans launched an initiative to raise the state’s tax on oil produced above 68° latitude north that reached more than 40,000 b/d in the previous calendar year and more than 400 million bbl of total cumulative production. Alaskan oil and gas producers immediately criticized the proposal, which would affect production in Kuparuk, Prudhoe Bay, and Alpine fields.

The monthly levy would be 10% of Alaska North Slope (ANS) crude’s West Coast per barrel price during the month the tax is collected, and an additional 1% for each $5 increment by which that price equals or exceeds $50. The maximum tax rate would be reached when the West Coast price reached or exceeded $70/bbl. The proposal would leave the existing tax system in place for small and new fields.

The measure would bring in an another $1 billion of oil production taxes, said Robin O. Brena, owner and managing partner of Brena, Bell & Walker PC in Anchorage who chaired former Gov. Bill Walker’s transition committee on oil and gas.

It potentially could wind up on Alaska’s November 2020 election ballot if it gets 28,501 voters’ signatures, an amount equal to 10% of the votes cast in the most recent gubernatorial election, according to the Encyclopedia of American Politics’ Ballotpedia web site. It said the state also requires that signatures equal to 7% of the vote in each of 75% of the 40 Alaska House of Representatives districts.

Signatures must be submitted before Alaska’s legislature reconvenes in mid-January 2020 or 365 days after Lt. Gov. Kevin Meyer prepares the petitions, whichever comes first, Ballotpedia said. If Meyer certifies enough signatures as valid, the state legislature can approve the indirect initiative or equivalent legislation, keeping the measure off the ballot. Otherwise, it would be certified to appear on the ballot for the first statewide election 120 days after the legislature adjourns, Ballotpedia said.

Alaska Oil & Gas Association Pres. Kara Moriarty warned on Aug. 19 that the proposal “would dramatically increase taxes on the heart of Alaska’s oil patch,” adding, “No industry in Alaska can sustain an increase of this magnitude without causing a disaster for our state’s economy. [It] represents an extreme policy shift that will undoubtedly have an impact on industry, the level of which we are still evaluating.”

She said the proposal comes as Alaska is “just barely” crawling out of a recession when the oil industry is one of the few bright spots in the state’s economy, according to the Anchorage Economic Development Commission.

“While the sponsors are trying to portray that new fields will be held harmless, any successful production, such as production from [the Arctic National Wildlife Refuge] or large new discoveries will eventually be under this new system. Make no mistake, the entire industry is at jeopardy with this initiative,” Moriarty said.

Contact Nick Snow at nicks@endeavorb2b.com.

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