Dan E. Dickinson CPA Extraction and the Role of the State: Alaska’s Oil and Gas Production Taxes...
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Transcript of Dan E. Dickinson CPA Extraction and the Role of the State: Alaska’s Oil and Gas Production Taxes...
Dan E.Dickinson CPA
Extraction and the Role of the State:
Alaska’s Oil and Gas Production Taxes
Dan E. Dickinson CPAArctic Energy Summit
Oct 10, 2013
Dan E.Dickinson CPA
Alaska Oil Production, 1965 - 2020
(1) Cook Inlet, Duck Island, Milne Point, Liberty, Pt Thomson, Fiord, Nanuq, Oooguruk, Nikaitchuq and NPRA.Source: Alaska Department of Revenue, Fall 2013 Revenue Sources Book.& earlier RSB, DNR 2007 Oil and Gas Report
Alaska Oil Production
19
6619
6819
7019
7219
7419
7619
7819
8019
8219
8419
8619
8819
9019
9219
9419
9619
9820
0020
0220
0420
0620
0820
1020
1220
1420
1620
1820
2020
220.0
1.0
2.0
All Other (1)
Alpine
Kup-Sat
Kuparuk
PBU-Sat
Prudhoe Bay
Mill
ions
of B
bls
a da
y
Actual Projected
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Dan E.Dickinson CPA
Tax Regimes in Alaska
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Dan E.Dickinson CPA
Royalty and Tax System
• Royalties – Bilateral negotiated contract between the owner of the resources and the producer (who brings money, production and marketing know how) – Authorized/Approved by the legislature– Negotiated and administered by the executive
• Taxes – Unilateral imposition of state’s police powers– Enacted by the legislature– Approved and administered by the executive– Interpreted and enforced by the courts– In Alaska
– Taxpayers ≠ Voters 10.1
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Dan E.Dickinson CPA
Jul-7
7A
ug-7
8S
ep-7
9O
ct-8
0N
ov-8
1D
ec-8
2Ja
n-84
Feb-
85M
ar-8
6A
pr-8
7M
ay-8
8Ju
n-89
Jul-9
0A
ug-9
1S
ep-9
2O
ct-9
3N
ov-9
4D
ec-9
5Ja
n-97
Feb-
98M
ar-9
9A
pr-0
0M
ay-0
1Ju
n-02
Jul-0
3A
ug-0
4 s o
0
20
40
60
80
100
120
140
$ pe
r bar
rel
ANS West Coast Price, July 1977 – July 2013
Source: Alaska Department of Revenue, Tax Division
Fiscal Save I: Price of Crude Oil
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Dan E.Dickinson CPA
Fiscal Save II: Changes to Production Tax
• Decade of Efforts to Fix the Decline• 2003 – 025 Exploration Credits Introduced (up to 40%)• 2006 (PPT) - Switch from Gross to Net (higher 22.5% rate,
lower base – high cost projects taxed less)• Progressivity introduced- Offsetting Credits expanded to cover losses and
investment (20%)- 2007 (ACES) - Progressivity rate augmented to .4%/$ above
$30 a barrel net (i.e. every $10/bbl increase in net value raises total tax rate by 2.5%); loss credits fixed at 25%
- 2010 (CIRA) – 40% Credits introduced to cover well work (IDCs & Well Workovers) (excluding North Slope)
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Dan E.Dickinson CPA
Fiscal Save II: Changes to Production Tax
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(Prog is defined as an additional .004 of rate/$ of PTV over 30)
Dan E.Dickinson CPA
Fiscal Results Graphic
SOURCE: SOA DOR Fall 2007, Fall 2008 & Fall 2009 Revenue Sources Book
State of Alaska General Fund RevenuesWC ANS price: $61.63 $96.51 $68.34
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
FY 2007 FY 2008 FY 2009
$mill
ions
All Other GF Sources O&G Royalties O&G Property Tax
O&G Income Tax O&G Production Tax
000 bbls a day: 750 730 702
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Dan E.Dickinson CPA
Fiscal Result Table
SOURCE: SOA DOR Fall 2007, Fall 2008 & Fall 2009 Revenue Sources Book
State of Alaska General Fund Revenues (& WC ANS price)
Thousands bbls a day: 750 730 702O&G as % of State GF Rev 88% 93% 90%
FY 2007 FY 2008 FY 2009Average ANS WC Price/bbl 61.63$ 96.51$ 68.34$ figures in $000,000:O&G Production Tax 2,292.3 6,879.0 3,112.0 O&G Income Tax 594.4 605.8 492.2 O&G Property Tax 65.6 81.5 111.2 O&G Royalties 1,613.0 2,446.1 1,465.6 O&G Subtotal 4,565.3 10,012.4 5,181.0 All Other GF Sources 675.2 780.0 650.2 Total GF 5,240.5 10,792.4 5,831.2
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Dan E.Dickinson CPA
Commonwealth North Board of Directors 10
11.2
3.20
10
How Significant was FY 2008?
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
8,000.0
9,000.0
10,000.0
11,000.0
12,000.0
1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009
Fiscal Year
Tota
l Gen
eral
Pur
pose
Unr
estri
cted
Rev
enue
Source: Alaska DOR Fall 2008 Revenue Sources Book (2009 data point from 2009 RSB)
Over 11% of the Unrestricted Revenuecollected in the first 50 years of statehood was collected in FY 2008
Annual revenueFirst broke $100 Million in 1968
Prudhoe BayLease Sale
FY 1970
Dan E.Dickinson CPA
State of Alaska Fiscal ResultsState of Alaska General Fund In/Out
Actual Projected
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
Unrestricted GF IN
Unrestricted GF Out
Oil Portion of Unrestrictred GF IN
$mill
ions
Sources: Revenue: DOR Fall 2010 RSB, Past Spending Annual Leg Finance Fiscal Summaries, Futurespending FY 2012 OMB 10- Year plan, Scenario, three w/ 6% annual increase
Note: Reporting change forGeneral Fund Spending in
FY 2010
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Dan E.Dickinson CPA
Conoco Phillips Net Income,
2,255
Conoco Phillips Net Income,
2,315
All other Costs, 2,010
All other Costs, 2,126 All other Costs,
2,140
Income Taxes, 1,248
Income Taxes, 1,317
Income Taxes, 716
Taxes other than Income Taxes,
3,432
Conoco Phillips Net Income, 1,540
Taxes other than Income Taxes,
1,135
Taxes other than Income Taxes,
1,663
-1,0002,0003,0004,0005,0006,0007,0008,0009,000
10,000
2007 2008 2009
$ m
illio
nsConocoPhillips (Alaska) Financial Results
ConocoPhillips Revenues (and uses) for Alaska Segment• Caution – Calendar Year, GAAP based, include CI gas (product price are US total)
Source: CP 10K filings for each year, pages 40, 41, 148, 149, 150
DV: $57.40/bbl $89.38/bbl $63.87/bb
Total Revenues: $7,716 $9,190 $ 5,521
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Dan E.Dickinson CPA
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0%
20%
40%
60%
80%
100%
120%
140%
Alaska United States Worldwide
Increase in Capital Spending forExploration & Development
2006-2012(Oil price [$/bbl]: 2006 = $62; 2012 = $113)
Source: Roger Marks, Presentation to Ninth Oil and Gas Congress Sept 17, 2013
Capital is Mobile
Dan E.Dickinson CPA
Changes from SB 21 Passed 2013
• (1) Severe Reduction (“End”) of Progressivity- Maximum tax rate drops from 75% to 35%.
• (2) Incentives -- Gross Revenue Reduction & Credits for “New Oil”
• (3) Many Changes to Structure of Credits• (4) Interest on underpayments significantly reduced• (5) All qualifying credit certificates can be cashed in upon
receipt• (6) Changes to Income Tax Credits
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Dan E.Dickinson CPA
Changes From SB 21 – New Oil
• Benefits for “New Oil”• (1) AS 43.55.160(f) – Tax is calculated
after Reducing Gross Value by 20% of Gross Value.
• (2) AS 43.55.160(g) - A further 10% reduction in the Gross Value if royalties> 12.5%
• (3) AS 43.55.024(i) – Additional credit of $5 a barrel for any new production
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Commonwealth North Board of Directors 16
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Production Tax Math
(Prog is defined as an additional .004 of rate/$ of PTV over 30)
Dan E.Dickinson CPA
Changes from SB 21 – New Oil
• AS 43.55.160(f) criteria for new oil:…(1) the oil or gas is produced from a lease or property that does not contain a lease that was within a unit on January 1, 2003; (2) the oil or gas is produced from a participating area established after December 31, 2011, that is within a unit formed under AS 38.05.180(p) before January 1, 2003, if the participating area does not contain a reservoir that had previously been in a participating area established before December 31, 2011;(3) the oil or gas is produced from acreage that was added to an existing participating area by the Department of Natural Resources on and after January 1, 2014, and the producer demonstrates to the department that the volume of oil or gas produced is from acreage added to an existing participating area.
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Changes from SB 21 – New Oil
• AS 43.55.160(f) – translation• (1) Oil from New Units (that don’t contain certain
bits of old units)• (2) Oil from New Participating Areas within Old
Units (that don’t contain certain reservoirs)• (3) Oil from New Acreage added to Old
Participating Areas – so long as you can ID to within 1/10 of one percent which is old oil and which is new oil. { .1% from proposed 15 AAC 55.213 (a)}
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Dan E.Dickinson CPA
August 2014 Ballot
• Two Narratives• Moral Argument, with feisty Alaskans standing up to
Rapacious Oil Companies– Or
• Empirical Argument, with Big Government over-reach once again strangling the golden goose – investment.
• From field of Psychology – In choosing between poor outcomes, people prefer the known to the unknown, in choosing between good outcomes, people are more willing to take risks. Will the election “debate” reflect this?
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Dan E.Dickinson CPA
Alaska Oil Production, 1965 - 2020
(1) Cook Inlet, Duck Island, Milne Point, Liberty, Pt Thomson, Fiord, Nanuq, Oooguruk, Nikaitchuq and NPRA.Source: Alaska Department of Revenue, Fall 2013 Revenue Sources Book.& earlier RSB, DNR 2007 Oil and Gas Report
Attaining Governor’s 2011 goal of 1 mm bbls/day by 2020
Actual Projected
19
6619
6819
7019
7219
7419
7619
7819
8019
8219
8419
8619
8819
9019
9219
9419
9619
9820
0020
0220
0420
0620
0820
1020
1220
1420
1620
1820
2020
220.0
1.0
2.0
GOV(2011)
All Other (1)
Alpine
Kup-Sat
Kuparuk
PBU-Sat
Prudhoe Bay
Mill
ions
of B
bls
a da
y
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Dan E.Dickinson CPA
Changes from SB 21 - Credits
• “Most Generous Incentives in the World” – – Tim Bradner, Economist
• In 2014 and 2015 Certain North Slope Frontier Exploration will qualify for 85% refundable Tax credit –
• Combination of 40% Exploration credit• 45% Loss Carry Forward Credit• Cook Inlet Credits – Up to 65% for Exploration Wells• 20% Qualified Capital Expenditures• 40% Well Lease Expenditures• 25% loss Carry Forward
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Dan E.Dickinson CPA
Thank You
Dan E. Dickinson CPAAnchorage, AK
[email protected] 301 5615
http://www.dedcpa.com/
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