Anchorage – On Monday, Rep. Les Gara (D-Anchorage) filed detailed public comments showing the Nuna oilfield will receive significant, and possibly excessive, tax breaks under little-known provisions in S.B. 21. The Parnell Administration, in its waning two weeks, proposed a roughly $40 million reduction in the royalties Nuna’s current owner, Caelus Energy, would owe Alaskans.  The Parnell Administration proposed to change the field’s existing lease terms to include additional revenue reductions at a time Alaska is facing a $3 billion budget deficit.

“Caelus purchased the Nuna lease knowing its lease terms, and knowing significant oil reserves had already been found by the prior leaseholder,” said Rep. Gara.  “Knowledge of Nuna’s discovered oil reserves was a factor in Caelus’ 2013 purchase of this lease.”

Rep. Gara wants the new Administration of Governor Bill Walker, which is in the middle of a busy transition period, to have the time to fully review the matter in light of potentially meager oil revenues in coming years.

“We should bring this field into production,” said Rep. Gara. “However, we need to make sure we are not giving away unjustified levels of state revenue.  That requires a fresh look by the new Administration.”

Nuna already receives tax breaks under S.B. 21 that produce a near zero or negative net worth for the state under a provision called the “Gross Value Reduction”, or “GVR”.  The “GVR” tax rate applies to fields placed in a production unit after 2002. The post-2002 GVR oilfields are addressed in a chart produced by economist Scott Goldsmith.

Exploration and development at Nuna began in 2011 under the former oil tax law, ACES. The public comment period on the Nuna royalty reduction proposal closes on December 12.  The decision whether or not to approve the proposal is up to the Commissioner of the Alaska Department of Natural Resources.

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