Alaskas Potential Tax Revenues

Author : Jonathon Shepard
Publisher :
ISBN 13 :
Total Pages : 286 pages
Book Rating : 4.:/5 (17 download)

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Download or read book Analysis of the Effects of Alaskan Production Tax Regimes on Current and Future Oil Production and State Revenues written by Jonathon Shepard and published by . This book was released on 2014 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report examines the effect that the Alaska Clear and Equitable Share (ACES) production tax has had on petroleum production in the State of Alaska and what effect, if any, the new production tax, SB 21, will have on future State of Alaska revenues. Through a literature review of tax regime changes and their effect on production in the United Kingdom over the last three decades, it was determined that direct taxes on oil production, and not taxes and credits on exploration and development, had the greatest impact on overall production. A review of historical tax regimes in Alaska showed that from the introduction of petroleum based taxes in 1955 till 2006, Alaska had a low, nonprogresssive production tax system. Beginning in 2008, the state switched to a high-level progressive tax regime with a total cap of 75%. Production decline models were used to determine that daily oil production in the State of Alaska became difficult, if not impossible, to predict after 2007. Comparing Alaska North Slope West Coast spot prices for oil to daily production rates detected irregularities in production, namely, when spot prices were high, production dropped. These two circumstances lead to the conclusion that ACES, a progressive tax system, had impacted daily production in the State of Alaska. Using production decline and future market value models based on historical data, projected daily production and monthly market prices were determined. Using these projections, twelve scenarios were run to determine how State of Alaska revenues would be impacted by a change from a progressive tax system to a flat tax rate. The scenarios showed that if market prices remain above $90 per barrel and no development and production occurs, the ACES tax system provides the highest revenues to the state. However, announced development plans that appear to be contingent on the SB 21 tax system indicate that new production, expected to be online in 2017, will occur, raising state tax revenues above those projected under ACES. Other scenarios show that if the spot market prices fall below $90 a barrel, the state will generate more revenue under SB 21.