Oil’s Plunge Puts Alaska Budget in Deep Hole

State wants to curtail ballooning subsidies as once-lucrative taxes on production dry up

For its entire history as a state, Alaska has made money, sometimes billions of dollars a year, by taxing the oil pumped from its wells.

That 56-year winning streak is over.

Alaskan leaders want to scale back subsidies designed to spur production by oil companies that have ballooned beyond expectations. Alaska is giving back more than $1 billion annually in tax credits and rebates to oil companies and Wall Street lenders, wiping out what had often been its largest source of income. In all, Alaska likely lost $263 million on its oil production tax program in the past year, state estimates show.

Companies ranging from giants ConocoPhillips, Exxon Mobil Corp. and BP PLC to Australia’s Linc Energy Ltd. have benefited from the tax breaks. Alaska enacted them about 20 years ago to stop a decline in production and expanded them in recent years as the oil boom increasingly lured drillers to North Dakota and elsewhere. The tax breaks now include cash payments covering as much as 85% of a well’s costs.

While the subsidies have succeeded in drawing in exploration-and-production work, their costs began skyrocketing just before oil prices started plunging in mid-2014.

http://www.wsj.com/articles/alaska-weighs-curtailing-oil-tax-perk-1446427016

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