Kelly Intros Bill Creating Tax Credit for New TAPS Oil
|HB 351 proposes to increase throughput through third-full oil line|
Posted: February 17, 2010
(Juneau) - Representative Mike Kelly, R-Fairbanks, today introduced HB 351, which proposes creating a tax credit for new oil transported through the Trans Alaska Pipeline System, or TAPS. The bill would retain the current 25% severance tax, including the progressivity provision, for “easier oil” which has already been discovered and is under development and production. New oil would pay only royalty under the bill, in addition to local property taxes and income taxes paid by all businesses. The tax holiday would last 10 years after the “new” oil enters the pipe.
The beauty of this bill is that it should give oil companies exactly what they need for new oil, while avoiding a shock to state revenue by cutting tax on all oil.
Kelly is confident this tax break, along with substantial oil exploration tax credits currently available or under consideration, should take off the table the argument that high tax levels are shutting down drilling for new oil in Alaska. “The beauty of this bill is that it should give oil companies exactly what they need for new oil, while avoiding a shock to state revenue by cutting tax on all oil,” Kelly said. “Critics may say that we risk losing state revenue from a large new discovery, but there will be no new discoveries if drill rigs are silent and a tax on nothing is still zip.”
Given the global economic and energy supply sea changes since 2007, Alaska oil taxes may be too high in spite of generous exploration credits.
Kelly also points out that an Outer Continental Shelf oil find like the one Shell Oil is developing in the Beaufort Sea is on federal property and therefore exempt from Alaska tax.
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