PPT: what it is. And isn’t.
By Commissioner Bill Corbus
Alaska Department of Revenue
In terms of importance to Alaska’s future fiscal stability and opportunities for its citizens, few, if any, proposed
legislative measures are as important as two bills now before the second regular session of the 24th Alaska State
Legislature.
Senate Bill 305 and House Bill 488 are companion measures sponsored by the Rules Committee in each body
and introduced at the request of Governor Frank H. Murkowski. The measure would repeal the obsolete
Economic Limit Factor oil and gas tax, commonly known as the ELF, to be replaced with a Petroleum Production
Tax or PPT.
The PPT will grow Alaska’s flow of revenue from its energy resources. That’s a direct and accurate explanation of
the true intent of the companion measures. It will grow our bounty from our resources in two ways: (1) it will
encourage investment to develop the resources and (2) when that investment yields high profits, it will take an
appropriate share.
PPT is about extending the life of what we have today.
PPT is about expanding exploration for what we seek for the future.
Governor Murkowski’s proposed PPT will stimulate investment in Alaska’s oil and gas sector by providing a tax
structure that takes into account profitability while rewarding investment.
By its very name – Petroleum Production Tax – the proposed system taxes net revenues. That is, the difference
between total revenue and costs. This profit based system, with reasonable and appropriate credits to spur
investment, provides the keys to maximizing long-term revenue.
Absent significant exploration, oil production in Alaska is forecast to decline at a rate of about two percent per
year over the next nine years. In recent years the Department of Revenue has revised its production forecast
down each year – and the main reasons are twofold:
Lack of investment
Prudhoe Bay has been producing oil for close to three decades and production is falling off somewhat f