A season of hope, a season of gloom: oil and gas exploration continues, but is expected to be at a slower pace in the future.

• Author: Bradner, Mike

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A modest winter exploration season is under way on the North Slope. Small independent companies plan wells near established infrastructure of the large producing fields and there are some new initiatives elsewhere on the Slope.

However, a major increase in oil and natural gas taxes approved by the state Legislature in November has dampened industry's enthusiasm, despite the sky-high crude oil prices. The tax is having only limited effects on exploration in the near term, however, because exploration is at somewhat of a low ebb and most projects planned for this winter were too far along when the Legislature, meeting in special session, raised taxes.

Generally the new production tax legislation will dampen exploration in future years because it can take as much as 50 percent of profits of new discoveries and more than 70 percent of profits for the total government share, which includes the royalty paid to the state if the discovery is on state lands. The tax is also helping nudge the industry into exploring federal offshore areas in the Beaufort and Chukchi seas, where the geologic prospects are actually better than onshore and where state taxes and royalties are not paid.

In one area, the recent tax change will actually help exploration, however. Exploration for natural gas in the Nenana Basin west of Fairbanks had been on hold since the Legislature increased state taxes on gas production in 2006. In the tax change that was enacted in November the tax on natural gas produced and used in the state was reduced substantially, from a tax rate of 22.5 percent of profits to 5 percent of profits. This is expected to encourage independent oil and gas companies to continue their work in the Nenana and Copper River basins because they hope to serve local markets with any gas they discover.

There are no new exploration initiatives in Cook Inlet, in Southern Alaska, but one interesting project that is continuing is Pioneer Alaska Inc.'s work testing a new exploration well drilled into the Cosmopolitan prospect, an oil discovery, that is 3 miles offshore Anchor Point on the Kenai Peninsula. ConocoPhillips Alaska Inc. is a partner in that project.

On the North Slope there are exploration projects under way to complete wells started last year or to further define or explore for extensions of discoveries made previously but still undeveloped. There are also wells planned in new areas, or at least parts of the Slope that have not seen drilling in many years. One area is the White Hills region south of the Prudhoe Bay field where Chevron plans to drill. Atlantic...