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“An Act relating to the oil and gas production tax; providing for a reduction in the production tax value of a producer in the amount of 30 percent of the gross value at the point of production for oil and gas produced from certain leases or properties north of 68 degrees North latitude that were not, as of January 1, 2008, in commercial production or within a unit; providing for a credit against the oil and gas production tax for costs incurred for conducting seismic exploration and drilling certain oil or natural gas exploration wells in certain basins; relating to the determination of the production tax value of oil and gas production; providing that the tax rate for new oil or gas production south of 68 degrees North latitude and outside of the Cook Inlet sedimentary basin may not exceed four percent of the gross value at the point of production; and providing for an effective date.”
Posted: January 27, 2012 : v27-LS1193-M
Bill Version: SCS CSHB 276(FIN) AM S
Status: Withdrawn By Sponsor : 2012-04-15
HB 276 is designed to incentivize exploration drilling in the underexplored Nenana Basin. The Nenana Basin has shown great potential, but has remained underdeveloped due to complications associated with its remote location. HB 276 is modeled after the Cook Inlet tax credits that successfully triggered a stampede of exploration. At a time when economic growth and development in the Interior is crippled by high energy prices and the lack of reliable energy supplies, this legislation will strongly encourage companies to invest in this high potential, frontier basin, located just 50 miles from Fairbanks. HB 276 has the potential to not only benefit the Interior but all Alaskans on the railbelt and beyond.
The tax credits will apply to the first three persons that drill an exploration well to the depth of 8,000 feet for the purposes of discovering gas or oil, and are structured as follows:
- The first person that drills an exploration well is credited 100 percent of costs, or $25 million, whichever is less;
- The second exploration well drilled is entitled to a credit of 90 percent, or up to $22.5 million;
- The third exploration well is credited at 80 percent, or up to $20 million.
If the exploration results in sustained oil and/or gas production from a reservoir discovered by the drilling, then 50 percent of the credits awarded will be repaid to the state.
Incentivizing exploration in basins that are located near energy starved regions of Alaska showing a high potential for production of gas and/or oil is another step, which will help support the economy and well-being of businesses and families in Alaska who are suffering from high energy costs and the lack of reliable energy supplies.
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