The small independents who depended on reimbursement from the State for oil and gas exploration may be getting a check in 2019, under Governor Walker’s proposed Alaska Economic Recovery Plan.
The Legislature ended what some called an over-generous cash credit program with the passage of HB111.
Tax credits have been credited with once dead Cook Inlet production rising up 80% since 2010, and the robust activity of smaller independent producers and explorers like Hilcorp, Caelus Energy, Repsol, and Armstrong.
After the State backpedaled on paying the tax credits, Caelus Energy delayed drilling of Smith Bay. The field is perhaps one of the largest finds in recent history on the North Slope – holding up to 2.4 billion barrels of crude.
As part of the Alaska Economic Recovery Plan, the Walker Administration proposes to pay off the $900M remainder of outstanding future-obligations to independent oil and gas exploration companies at a lower rate.
It is hoped that the payments will create more confidence in the State for independent producers, which will equate to greater investment.
The State plans on offering a 10% discount rate in the fiscal year 2019. The rate will be lowered to a 6% discount rate in exchange for an override royalty interest in the well.
To fund payment of these outstanding credits, the state will issue bonds with the discount covering the cost of borrowing.
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