Moody’s gives thumbs up to oil tax reform vote

Moody’s Investors Service, one of three credit agencies covering the State of Alaska, said the August primary election decision by Alaskan voters to retain the More Alaska Production Act was a “credit positive” for the state.

While the latest update issued by Moody’s is not a credit-rating action, it does affirm that the state’s AAA rating is stable. Triple A is the highest possible rating that helps Alaska secure lower interest rates when issuing debt to raise funds. Municipalities needing to issue bonds also benefit from that rating.

Moody’s said MAPA “may stabilize” declining oil production.

“While producers have no legal commitment to increase Alaska production, they have indicated a desire to do so under MAPA’s more favorable provisions,” the update noted. The Moody’s report cited state expectations that the former tax law, ACES, would bring in more revenue at high oil prices, but that MAPA would “produce better or comparable results” if oil prices remain under $110. The state also expects MAPA to encourage more investment, resulting in more production over the long term.

Moody’s noted that the state will publish a new revenue forecast in December factoring in new production directly related to MAPA.

Since MAPA was enacted in 2013, producers have increased investment, added new drill rigs, and stem the decline in North Slope production, which averaged 8 percent annually under ACES.

In the August primary, Alaskans voted by a 52.7 to 47.3 percent margin to reject Ballot Measure 1, which would have ditched MAPA and returned the state to the former tax policy, ACES. 99,855 voted no on the measure while 89,608 voted yes.

The yes vote prevailed in Fairbanks, Southeast, and coastal communities, including Kodiak, Dillingham, and Homer, as well as the regional hubs of Bethel and Nome. However, the no vote carried heavily in Anchorage, Mat-Su, and the Kenai-Soldotna area. The no vote also prevailed in many rural villages where Alaska Native corporations campaigned against repeal of MAPA. It was especially prevalent in Northwest Alaska and the North Slope Borough.

“Thank you to Resource Development Council members and staff for all your hard work and dedication to giving oil tax reform a chance to work,” said Kara Moriarty, President and CEO of the Alaska Oil and Gas Association. “Because of your leadership and involvement, Alaska has a bright economic future. We look forward to working with all Alaskans in developing our state’s natural resources.”

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