Oil industry profits revive tax cut debate
Alaska’s biggest oil companies are reporting strong profits from the North Slope this year, but Gov. Sean Parnell is still saying oil taxes need to be lowered because oil production is declining.
“There is an undeniable fact: oil production is down — sharply. We can’t afford to do nothing,” said Sharon Leighow, Parnell’s spokeswoman.
Rep. Les Gara, D-Anchorage, called Parnell’s proposal to reduce state oil taxes an “unwarranted giveaway.”
In the last week ConocoPhillips Co. and BP plc reported profits for the first half of the year.
ConocoPhillips reported earnings of $1.04 billion in Alaska, while BP plc is reporting profits of $784 million in the state. Those companies are the two largest oil producers in Alaska. The third of the state’s big three oil producers is Exxon Mobil Corp., which does not publicly release its Alaska profits.
ConocoPhillips is doing better in Alaska than they are elsewhere, Gara said.
“Alaska is a cash cow for them,” he said.
High prices the companies are receiving for Alaska North Slope crude oil this year mean the companies’ profits this year may come close to the record year of 2008, when oil prices peaked at $140 a barrel.
Alaska North Slope crude oil was going for $113.70 a barrel Friday, according to the Alaska Department of Revenue’s Tax Division.
The year 2008 was also a boon for the state, as Alaska had just passed the Alaska’s Clear and Equitable Share oil tax law following the revelations of oil industry bribes paid during the establishment of the previous tax rates.
An industry analyst on questioned ConocoPhillips executives about that issue last week following the earnings announcement, noting the high profits “even with the penalty of the new tax regime in Alaska.”
Jeffrey Sheets, Conoco’s chief financial officer complained about how much Alaska’s taxes were taking from the company.
“A substantial part of the increase in prices, of course, in Alaska goes toward higher production taxes,” Sheets said.
Leighow said Alaska needed to lower taxes to make the state more competitive and get more oil in the Trans-Alaska Pipeline.
Gara said the state’s existing targeted tax incentives were already spurring new development, citing new Alaska efforts by several companies new to Alaska.
“Just giving oil companies money, hoping they’ll give it back, has never worked, and won’t work now,” Gara said.
Sheets told the Wall Street analysts that they didn’t expect immediate action on tax reductions, but several legislators promised to renew their efforts in the next legislative session.
House Bill 106, offering billions in tax reductions, passed the House of Representatives by a vote of 22-16 last session. Rep. Cathy Muñoz, R-Juneau, voted in favor; Rep. Beth Kerttula, D-Juneau, voted against.
The bill is currently in the Senate’s Labor and Commerce Committee, Chaired by Sen. Dennis Egan. D-Juneau.