ESA finds that the annual cash refund of the tax value of petroleum exploration costs under the Norwegian Petroleum Tax Act does not entail state aid.
The EFTA Surveillance Authority (ESA) has today issued a press release, informing that ESA has finalized its preliminary examination of the Norwegian oil exploration refund scheme. ESA finds that the annual cash refund of the tax value of petroleum exploration costs under the Norwegian Petroleum Tax Act does not entail state aid under the EEA Agreement.
The petroleum exploration cost refund scheme was introduced into the Norwegian Petroleum Tax Act in 2005. The scheme makes it possible for oil companies to claim an annual refund of the tax value of costs related to petroleum exploration activities. It can take many years from the commencement of exploration activities to actual production and generation of taxable income. The petroleum exploration cost refund scheme makes it possible for oil companies without other taxable income in which to offset exploration costs, to claim the tax value of such costs on a current basis. The alternative would have been to carry forward the costs in the form of tax losses until the relevant oil company generated taxable income from the oil production against which these losses could be offset. This could represent a substantial economic burden for oil companies, and a disincentive and potential hurdle for interested parties to commence petroleum exploration activities on the Norwegian continental shelf.
The petroleum exploration costs refund scheme was challenged by the environmental organization Bellona in 2017, alleging that the scheme represented illegal state aid contrary to the EEA Agreement. Bellona argued that the refund scheme gives a selective advantage to some companies, and that this advantage cannot be justified.
ESA has now formally stated that they disagree with Bellona's position, and will not proceed with the case. ESA concludes that the refund scheme is not selective because it is available for all companies on equal terms and conditions, and as such not in breach of the state aid regulations in the EEA Agreement.
You can read the decision here.