Oil Companies Want Tax Break

By Libby Casey

Representatives of the oil industry were at the capitol yesterday to offer general support for governor Parnell’s bill reducing their taxes in an attempt to increase production on the North Slope.

With a recognition that oil production is declining – and will continue to decline over the years – Conoco-Philips’ Vice President for external affairs, Wendy King,  said that Alaska still has very high possibilities for finding and producing more oil.  But, she says with those possibilities, there are problems to overcome.

The challenge we see these days as an industry is the costs are higher these days to produce a barrel of oil.  The technology requirements are greater.  The reservoirs are more complex.  The bigger sands, the thicker pools of oil – we’ve been able to find those.  Now the stuff we’re able to find is challenging.  It’s more challenging to find that oil these days.  But we believe it’s there.

She told the House Resources Committee that a lot of factors come into play when her company is deciding to invest in a project – and the biggest concern is uncertainty in the return on their investment.  In considering the risk-versus-rewards of an investment,  she says the state’s “progressivity”  surtax on profits from high oil prices takes away from the rewards side of the consideration.

Where we see the biggest challenge with the ACES tax structure is the progressivity piece.  And where that effects us is,   where oil prices are high, particularly in an oil province like Alaska – that’s when companies are generating a significant cash-flow opportunity where they can reinvest – but with the progressivity so steep,  what you’re seeing is rather than that coming back for the parties to be able to reinvest,  it’s being paid out in taxes.

Governor Parnell’s proposed changes to the state’s tax regime would effectively lower the progressivity feature – by an estimated Billion dollars of state revenue per year.


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