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Q. What is the best way to communicate questions?
A. Forward questions via fax (907) 276-3338 or email to Lana Steinert at (lana.steinert@alaska.gov),
Project Coordinator, Office of the Commissioner, Department of Revenue.
Q. For ACES, what were the state’s revenue objectives?
A. The production tax team was not given a revenue objective. As benchmarks, the team used both the
status quo projection contained in the Spring Revenue Source Book for the Petroleum Profits Tax (PPT),
and the revenue projections contained in the fiscal note for HB3001 (PPT) as a starting point.
The revenue projections then changed as a result of DOR modifying the other economic variables that
affect the calculation of production taxes to strike the optimum balance between encouraging future
investment, protecting existing investments, and ensuring a fair state government share of revenue.
Q. What is the story behind the increase in upstream costs?
A. During the Special Session, the Department of Revenue (DOR) will present an explanation of the cost
assumptions used at the time the PPT was passed and what has changed since then. The bottom line is that
we don’t have enough information to fully explain the difference between what was expected and what has
been reported. The ACES requirement that producers’ supply more extensive cost information, both
historical and future, is intended to prevent future deviations between the costs predicted by the
state at the time legislation is passed, and what in fact occurs later. The DOR has also modified
its state revenue forecasting model to incorporate a wider range of cost scenarios, and a linkage
between estimated costs and predicted oil prices.
Q. Was industry consulted as you developed ACES?
A. Yes. Department of Revenue had meetings with industry early on in the process of developing ACES.
The uniform desire of industry was to retain a net tax structure because of its beneficial effect on
future investments.
Q. How does ACES impact future gas development?
A. The changes to the oil and gas production tax law under ACES apply to both oil and gas. However,
the economic impact of ACES has only been analyzed with respect to oil. The administration fully intend
to review the impact of ACES on gas development in the near future when greater detail is known about
probable costs of and production profiles that will be associated with future North Slope gas
commercialization.
Q. Shouldn’t ACES also include language that requires facility sharing on the North Slope so that there is a greater positive impact on new development?
A. We agree that facility sharing is a very key element needed to expand future North Slope oil and
gas development opportunities. The PPT, however, relates only to the limited scope of oil and gas
production taxes and therefore, facility sharing would need to be undertaken in separate legislation.
Q. Will the costs of a gas pipeline be deducted against future state oil revenues?
A. No. Only costs that are upstream of the point of production of oil or gas can be deducted from oil revenues
under existing PPT and ACES. Currently the point of production is defined under AS 43.55.900(20) as essentially
being the point right before the oil enters a pipeline in pipeline quality, or where the gas is accurately metered
after being processed. In both instances, this is prior to the oil or gas entering a gas or oil pipeline that takes
it off the North Slope.
AS 43.20.043 (f) of the existing PPT language states:
A taxpayer is not entitled to a credit under this section for expenditures that are made or incurred for the qualified
capital investment or for qualified services made for exploration and development of gas that occur in the area of Alaska
lying north of 68 degrees North latitude or that are made or incurred to transport gas from reserves located in the area of
Alaska lying north of 68 degrees.
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