Oil Tax Credits

Tax credits are an important tool in Alaska’s stable and predictable tax policy. Credits act to encourage investment that will positively impact production and reduce the deemed risk of expenditures by industry. The State of Alaska offers a variety of tax credits to incentivize investment across the state.

Whether drilling a well, building a facility to gather new oil, or installing a pipe to transport new oil, tax credits help companies offset investment risks that companies make in Alaska. For example, one credit focuses investment on subsurface intangible-drilling expenditures- well activity- which is a direct investment in increasing oil and gas production. Another credit increases the likelihood of participation by new industry players who might otherwise have been deterred from coming to Alaska by presumptions of increased risks and of higher-than-average costs and expenses. New participants with new ideas can only strengthen and improve the Alaska petroleum industry and help the state increase production.

There is no credit without real money having first been spent on exploration and development work that qualifies for the tax credit. So it costs the state nothing to offer the credit until the investment is made and at that point, the credit has already succeeded in what it was intended to do- attract investment dollars to Alaska.

Current policies have created a positive investment climate in Alaska, with predictable tax rates and credits that incentivize desired activities, and industry has responded positively.

-          Cook Inlet production- which is the source of electricity and heat for Alaska’s railbelt- has increased 80% since the Cook Inlet Recovery Act took effect in 2010.

-          New and smaller players have begun operations on the North Slope. For example, Caelus Energy entered Alaska in 2014, and has already invested $1.5 billion in a new field, which is slated to produce up to 20,000 barrels of oil per day by 2017.