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European Authority: Norway’s Oil Exploration Refund Isn’t State Aid

Norway’s taxation legislation allowing companies to claim refunds for exploration costs is not the same as state aid, the EFTA Surveillance Authority (ESA) said on Wednesday after examining a complaint filed by environmental non-profit organization Bellona.

Bellona filed a complaint with the European Free Trade Agreement (EFTA) Surveillance Authority in August 2017, arguing that Norway’s annual cash refund constitutes unlawful state aid.

Norway introduced the refund system in 2005 “to reduce the entry barriers for new actors and encourage economically viable exploration activity,” under its petroleum taxation system.

Under the measure that provides exploration cost refunds, companies that incur a loss may choose between an immediate refund of the tax value of exploration costs from the taxation authorities and carrying forward the losses to a later year when the company may have taxable income.

Bellona has argued that the exploration costs refunds are discriminatory against petroleum activities other than exploration and against renewable energy such as solar and wind, and therefore constitutes unlawful state aid from the Norwegian state by giving a selective advantage to certain companies.

“Having scrutinised it on the basis of a comprehensive complaint, ESA is satisfied that this tax rule does not entail state aid”, ESA’s President Bente Angell-Hansen said in a statement today. 

“ESA has now concluded that the measure is not selective,” the authority added, noting that “According to EEA state aid rules, a measure that is not selective does not constitute state aid.”

The European Economic Area (EEA) unites the EU member states and the three EEA EFTA states, Iceland, Liechtenstein, and Norway.

Meanwhile, Norway’s government proposed last week to expand the area that will be offered for oil and gas exploration in the 2019 licensing round of acreage in mature areas, hoping that more discoveries could be made to offset an expected decline in Norwegian oil production from the mid-2020s onwards.

By Tsvetana Paraskova for Oilprice.com

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