oil finds that could add 550,000 barrels of oil
per day into the pipeline.
But in 2016, House Bill 247 phased out tax
credits in Cook Inlet and sunsetted exploration credits on the North Slope.
“Alaska cannot control the price of oil, but
it can control what kind of business climate
we create here: one that encourages continued investment and more oil for TAPS,” according to RDC.
Backtracking on the tax credits has an immediate impact on oil company plans in the
state. In late 2017, Furie Operating Alaska, an
oil and gas company operating in Cook Inlet,
told the state it was putting its exploration
plans in its Kitchen Lights unit on hold because of “the lack of any meaningful appropriation to the oil and gas tax credit fund for
the purchase of Alaska oil and gas production tax credit certificates.”
Projects Being Stalled
in Wake of Tax Nonpayment
BlueCrest Energy also initially said it would
stop its Cook Inlet drilling program because
of nonpayment of tax credits, but later announced it would drill at least one well in
“The liabilities sitting out there because
of the lack of significant payment of those
credits is really impacting the companies’
ability to either keep investing in Alaska or
attract capital to Alaska,” AOGA’s Moriarty
says. “So if we were going to be advocating
for anything, it’s a payment plan that’s more
than the minimum payment that the state’s
currently been paying because at this rate,
it’s going to take them twenty-some years to
get those credits paid off. And that’s money
that’s been spent, sunk, and gone, and now
companies are scrambling.”
The oil industry cannot endure another
change in taxes, Moriarty says.
“Enough is enough,” she says. No more
changes to the tax system and a significant por-
tion outstanding tax credits need to be paid.
“It all boils down to how can Alaska send a
message that they’re a good business partner,
because I just think the state has a reputation
issue that need to be improved,” she says.
The Alaska Legislature can do a couple
things to address its reputation in business
circles, says Caelus’ Sullivan.
“First and foremost is a substantive ap-
propriation via the governor in his proposed
budget,” he says. “By substantive, I mean a
couple hundred million dollars to get those
refunds off the books.”
It’s the right time to do this, he says. The
financial industry outside Alaska needs a
strong signal that Alaska is open for business
because right now it feels as though it’s not.
In addition, the Legislature needs to fi-
nalize regulations around House Bill 111
(HB111) to ensure the viability of a secondary
market for the tax credits. Right now, Sulli-
van says, companies can sell them to other
entities in the state that can use them to offset
their tax liabilities, but there are restrictions.
HB111 sought to ease those restrictions.
Meanwhile, Caelus’ plans for 2018 hinge
on the Legislature’s actions. Although Nuna
is on the shelf for now, Caelus will continue
to produce oil at its Oooguruk field. But an-
other project faces more uncertainty.
In late 2016, Caelus made a massive discov-
ery near Smith Bay. The field is estimated to
contain 6 billion to 10 billion barrels of oil,
enough to boost the amount of oil in the trans-
Alaska pipeline by 40 percent. Caelus planned
to drill another well at the site this winter to
further delineate its commercial viability.
“But again, sort of the combo of the price
and the policy, we’ve delayed that project;
we’ve delayed that opportunity because it’s a
super long-lead item,” Sullivan says. “You’ve
got to get lots of people up and running well
in advance and we just didn’t even know
what the rules were because we’re still delib-
erating HB111, we didn’t know what the bud-
get looked like, so that is delayed yet another
year if not more.”
Sullivan says the company has a lot of re-
spect for the governor and the Legislature and
understands the state’s focus isn’t just Caelus.
“We really believe Caelus can be a great
part of the solution and our projects will be
an integral part of [Alaska’s] budget and fiscal solution for decades to come,” Sullivan
says. “So we’re excited to get after it as soon
as we can.” R
Julie Stricker is a journalist living near
3601 C Street, Suite 1424
Anchorage, AK 99503
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