Alaska tax change reduces burden on North Slope producers Report

Insight 21 May 2013

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Report summary

Alaskan Governor Sean Parnell signed Senate Bill (SB 21) in an effort to incentivise investment and stem the state's 25-year decline in oil production. The law, which eliminates the current system's (ACES) progressivity mechanism and amends how tax credits are awarded, will become effective on 1 January 2014.

Why the change?
- State government relies on oil tax revenues
- Alaskan production and activity trending downward
Senate Bill 21 reduces tax burden
- ACES's harsher elements overhauled
  - Progressivity mitigated, but not eliminated
  - GRE is attractive, but open to interpretation
  - Credits for losses increased
  - Some items on industry's wish list excluded
- All fields' economics improve
  - SB 21 can become a tax increase under certain scenarios
- Improves on ACES, but still more onerous than in the past
  - Federal government benefits
  - Uncertainty remains
    - Repeal is real possibility
    - Will SB 21 achieve its goal?
  - Appendix – economic assumptions

Tables and charts

This report includes 4 images and tables including:

Summary of SB 21's changes
SB 21's impact on valuation of each North Slope field
Value of hypothetical 50-million-barrel satellite field under various tax treatments and price scenarios
Timeline of Alaskan oil tax legislation and impact on governments' share