Oil and Gas Legislative Priorities: Stability and Certainty: Uncertain tax credit future, potential changes to tax structure chills projects.

• Author: Stricker, Julie
• Position: OIL & GAS

Just east of the Colville River on Alaska's North Slope, winter winds whip over a lonely twenty-two-acre, L-shaped gravel pad. The pad--the site of Caelus Energy's Nuna project--was expected to be home to hundreds of Alaskan oil workers this winter, but instead it remains barren and desolate.

Caelus Energy is a privately-held independent exploration and production company headquartered in Dallas. It operates the Oooguruk field a few miles from Nuna and planned to bring Nuna online in 2017. Caelus shelved those plans last year when the fiscally-challenged state stopped paying out tax credits already promised to oil companies as a way to increase oil production.

"It's a shovel-ready project," says Caelus spokesperson Casey Sullivan. "It will employ 300 Alaskans almost immediately and in a very short time it will produce 25,000 barrels [a day] of new oil for Alaska."

If Alaska indicated the payments would be resumed, Sullivan says, Caelus would be able to finish the work at the site and ramp up production as soon as late 2019.

"It is literally one of those that's on a platter. It's ready for Alaskans," he says. "We've lost thousands of jobs in the oil service sector. It could easily restart a little spark of our economy, get these people back to work and put more oil in the pipe very, very quickly."

Oil is more than important to Alaska; it is our economic foundation, historically contributing nearly 90 percent of the state's general fund revenues. Even with the current sluggishness in oil prices, which have hit state coffers hard, the oil industry still provides two-thirds of the state's unrestricted funds and supports one-third of the economy, according to the Resource Development Council.

But the uncertainties of the future of tax credits and potential changes to the tax structure put a chill on the Nuna project. It's a refrain heard throughout the resource development industry in Alaska: fiscal uncertainty is stalling projects and delaying investments. Stabilizing the tax structure is the foremost priority the industry is taking to the Alaska Legislature in 2018.

"We're not advocating for any piece of legislation," says Kara Moriarty, president and CEO of the Alaska Oil and Gas Association (AOGA). "We're not trying to get anything changed. We're just trying to maintain and keep a stable environment. The only thing that we would specifically be wanting is for the state to develop a better payment plan for the $600 [million] to $700 hundred...