Work continued on the Senate’s oil tax bill in the Senate Finance Committee this week as we heard several days of public, industry, and support group testimony as well as additional expert testimony from global oil and gas consultant PFC Energy.
Yesterday and today, PFC Energy presented further analysis of the oil tax bill (Senate Bill 192) and modeled alternative options for two key provisions of the oil tax bill: changes to the progressivity tax and incentives for new oil production. Those alternatives included various methods of lowering the progressivity tax (which increases the amount of tax owed by an oil company as the price and profit from a barrel of oil increases) and ways for reducing the production tax specifically to make projects that would increase overall oil production more attractive to investment.
PFC Energy also presented historical data showing that at current high oil prices the total value of annual North Slope oil production today is roughly the same as it was in 1991, even though today’s production of approximately 600,000 barrels per day is about a third of the 1.8 million barrels per day that was being produced in 1991.
PFC Energy also re-analyzed data that was presented during the legislature’s original discussion of ACES. That original data was part of a presentation entitled “ACES Preserves Investment Climate” and given to the legislature by members of the Palin-Parnell Administration in October of 2007. The Administration’s analysis showed that a range of new oil fields would be profitable under ACES as proposed. However, PFC Energy’s re-analysis, which looked at similar oil fields, but under ACES as enacted and at today’s significantly higher production costs, showed that new oil fields would be only very slightly profitable and only at relatively high oil prices.
PFC Energy’s presentations can be accessed online.
Next week, Senate Finance Committee’s work on the oil tax bill will include presentations from the Departments of Revenue and Natural Resources, as well as further analysis by PFC Energy.
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