Revenue.(2007 Alaska Forecast)(Excerpt)

The Alaska Department of Revenue creates an official forecast of Alaska State Revenue and the most recent version was released Nov. 30, 2006. The information, in part, for this article is taken from the official forecast at http://www.tax.state.ak.us/sourcesbook/. Three factors dominate the forecast: pipeline closures on the North Slope, high crude oil prices, and a new production tax. Taken together, these result in projected oil revenue of about $4.3 billion for general fund unrestricted revenue for FY07 and represent about 88 percent of the State's discretionary income.

The department forecast for ANS crude oil production is about 740,000 barrels per day (b/d) for FY07. This is a 13 percent decline from FY06 and is partially attributed to oil production that was shut in due to pipeline corrosion issues at Prudhoe Bay, Lisburne and Milne Point.

The department forecasts that ANS crude oil prices on the West Coast will average $59.15 per barrel for FY07-about 3 percent lower than the FY06 price of $60.82.

Revenue from oil is received from the State's royalty share, production tax, corporate income tax and property tax. The Petroleum Profits Tax (PPT) is the new production tax that was signed into law in 2006. The structure of the PPT as a tax on net value and the associated tax credits, was designed to encourage investment in the state's petroleum sector that would lead to higher oil production and thus higher long-run revenues. This system is radically different from the old ELF-based system. The Department of Revenue estimates for FY07 that the PPT will provide the State with about $1.2 billion more than production taxes under the ELF-based system.

Michael Williams, Chief Economist, Alaska Department of Revenue

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