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Industry: Good points, problems with oil tax bill

Published on NewsOK Modified: February 5, 2013 at 9:13 pm •  Published: February 5, 2013

JUNEAU, Alaska (AP) — Gov. Sean Parnell's plan to overhaul Alaska's oil tax structure is a positive step toward improving the state's business climate but there's room for improvement, one of the North Slope's major players says.

ConocoPhillips Alaska executives Scott Jepsen and Bob Heinrich, in a presentation before a special Senate committee Tuesday, said Parnell's plan makes the state a more competitive place for investment with oil prices of $100 a barrel or higher. But Heinrich said it doesn't contain sufficient incentives for legacy fields to offset the high cost of operating in Alaska and would constitute a tax increase at lower oil prices.

Jepsen, vice president of external affairs, said his company would invest more in Alaska in the right environment but suggested a plan that would lead to that hasn't been proposed yet. In an interview later, he said the company would make decisions on a project-by-project basis.

Parnell has proposed sweeping changes to Alaska's oil tax structure, aimed at making the state more competitive and encouraging new production. His plan — SB21 in the Senate, HB72 in the House — would eliminate the progressive surcharge that companies have said is a disincentive to new investment and would revamp a suite of tax credits, focusing on companies that produce new oil on the North Slope. It would keep in place the current base tax rate.

"My pledge to you is this: I will work to pass a tax system that is fair to Alaskans, one that encourages new production, one that is simple so that it restores balance to the system, and one that makes Alaska competitive for the long term," he said in his latest weekly "oil tax reform" message.

Democrats say the plan could deprive Alaska of its "fair share" of oil revenues. Democrats in both the House and Senate have said they plan to introduce proposals of their own aimed at new production.

Kara Moriarty, executive director of the Alaska Oil and Gas Association, told the committee Parnell's plan represents a cornerstone for "significant and crucial tax reform." But she said her group has concerns about how the bill deals with tax credits, and believes a tax break geared toward new oil should be expanded.

The special Senate committee on oil flow through the trans-Alaska pipeline is expected to advance Parnell's bill to Senate Resources later this week.

A co-chairman of the special committee, Mike Dunleavy, R-Wasilla, told reporters the panel likely will send the bill on with recommendations, which could be on Parnell's measure or on points that committee members want their colleagues to take a closer look at. While Parnell's bill has been a focus of the committee so far this session, Dunleavy's co-chairman, Peter Micciche, has said repeatedly that the panel isn't an oil tax committee and will look at other issues that also might be affecting production.

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