Resource Development Council

RDC Testimony:
CS SB 21 - Oil and Gas Production Tax

Anchorage LIO
Before House Finance
Testimony provided by Rick Rogers

April 9, 2013

Good evening, Co-Chairs Austerman, Stoltze and members of the committee. My name is Rick Rogers, Executive Director of the Resource Development Council.

RDC encourages the committee to remain focused on the ultimate goal of this legislation, increased production from both legacy and new oil fields. We understand the tension between balancing short-term impacts to the treasury with the long-term benefits to the treasury and the economy as a whole. We remain concerned that a short-term focus could undermine the overall purpose of this legislation, to increase production activity and stem the TAPS throughput decline.

Competitiveness is not a single point, but rather a continuum. The current CSSB21 is far more competitive than ACES. The degree to which we modify our tax policy should keep in mind the challenges of operating in Alaska: a short operating season; high costs; lack of infrastructure; and the very real delay risks associated with the need for federal permits. To attract sufficient investment capital to overcome our Alaska specific challenges, we need to be sufficiently aggressive in tax reduction to stand ahead of the competition.

This important public policy decision is not about helping industry. Its about helping Alaska so we have a more prosperous outlook for the future. There has been much discussion about guarantees. The real guarantee is that if we maintain the status quo with ACES, we guarantee continued production declines in the 7% per year range with significant revenue reductions. The real give away is oil left unrecovered in the ground with no benefit to Alaskans.

We encourage this committee to maintain the 33% base rate, the extension of the small producer credit to 2022. I call your attention to slide 11 from Pioneer Natural Resources testimony earlier today. That slide illustrates that the house resource committee changes to the bill dramatically improved the new field economics. With new production as the goal this is encouraging.

Finally we support appropriate amendments necessary to address what appear to be unintended consequences on frontier basins as expressed by Doyon earlier today.

Thank you for your continued hard work on this issue and for the opportunity to comment.