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Everyone likes a good tax break, and Alaska鈥檚 governor is courting the oil and gas, timber and mining industries with a legislative proposal designed to make the state as attractive as North Dakota.

On 29 January, Alaska Governor聽Sean Parnell聽proposed tax cuts at a legislative hearing.

So would tax breaks be enough to turn Alaska into North Dakota鈥攖o ensure an Alaskan Bakken?

Alaska鈥檚 economy is in trouble and oil and gas production are declining and explorers and developers complaining of too much red tape and prohibitive taxes.聽聽

According to the Senator in a聽commentary聽published in Alaskan media, 鈥淭he volume of oil transported through the Trans-Alaska Pipeline System (TAPS) has steadily declined over the past few decades. Whereas 2,100,000 barrels per day were being transported in 1988, fiscal year 2012 saw a mere 579,100 bpd. That's a 71-percent decrease. Moreover, that volume is expected to further reduce to 552,800 and 538,400 in fiscal years 2013 and 2014, respectively. If current policies remain in place, the Department of Revenue expects the decline in oil production to continue at a rate of 5.5 percent per year through the next decade.鈥澛�(Related article:聽Big Taxes, Big Oil)

At the same time, Alaska's revenue commissioner has said there he has seen no evidence that existing tax credits to oil companies have led to increased production. However, he told the聽Associated Press聽that while he hasn鈥檛 seen such evidence that does not mean it doesn鈥檛 exist. Still, a direct connection has not been made.

Alaska used to be the darling of American oil production, but now even North Dakota has surpassed it. One problem is that companies have not been very interested in exploring for conventional crude oil reserves, with the focus more on unconventional shale. And while tax credits have helped somewhat to attract more exploration, it has only gone so far and legislators have yet to come up with a plan that would really focus on boosting oil production.

And this is where the proposed change to the tax rate comes in. If we can judge by the response of the industry to these proposals鈥攖hey are making a very public show of support for the Senator鈥檚 efforts鈥攖hen a tax rate that is more competitive could be the engine that helps ramp up production.听(Related article:聽Alaska: Gas Rich, but No Longer Relevant)

Alaska has fallen on hard times overall, especially since the natural gas boom has rendered its bountiful reserves less relevant. The state is hoping to cash in on US gas exports. It needs a new market for its gas鈥攆or which it is first and foremost eyeing Japan鈥攂ut for now this issue remains controversial.

For now, export licenses are considered separately by the Department of Energy, which determines on a case-by-case basis whether it is in the country鈥檚 interest. The oil industry is out in full force lobbying for unlimited gas exports, while other industries, like chemical manufacturers, want to keep gas supplies at home to boost manufacturing.聽聽

Natural gas exports, though, would require massive investment in infrastructure, and this ties back to Alaska鈥檚 investment climate: the state鈥檚 tax environment isn鈥檛 attractive enough to lure the necessary infrastructure investment.

Original source:聽http://oilprice.com/Energy/Crude-Oil/Alaska-Mulls-Oil-Industry-Tax-Break-to-Boost-Production.html