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Norway Plans Tax Breaks For Oil Companies In Arctic

Arctic

New tax breaks will put Norwegians on the hook for oil production taxes levied by the United Nations for drilling deeper in the Arctic, according to Reuters.

The report suggests the strategy of spreading legal costs to citizens could set an example for other nations planning to explore fossil fuel production farther and farther from solid land.

Opposition parties in Norway seek to limit oil exploration in the country’s waters. The Scandinavian country’s sovereign wealth fund is famed for using its fossil fuel wealth to fund the development of green energy initiatives within its borders.

“There is too little risk on the companies, and too much risk on the people of Norway,” Ola Elvestuen, who chiefs the Energy and Environment committee as a representative from the small Liberal Party, said. “Neither me, nor the committee were informed about this,” he said regarding the plans, which were described in special letters given to Reuters by the Oil and Energy Ministry.

Article 82 of the U.N. Convention on the Law of the Sea stipulates that rich nations must pay a seven percent tax per year on any fossil fuel production that occurs beyond 200 nautical miles from land. The capital from those fines are meant to be used to fund development efforts in other countries.

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Hypothetically, the International Seabed Authority based in Jamaica would receive the money for its projects, but no country has yet attempted to drill so far into the ocean. The United States and Norway are the only two nations that have discussed the implementation of Article 82, with the former concerning itself with efforts to explore further in the Gulf of Mexico.

“The licensees could be required to cover certain costs in this connection,” the petroleum ministry wrote in the letters to oil companies. “Any such cost will be deductible in the calculation of the petroleum tax.”

By Zainab Calcuttawala for Oilprice.com

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