Posted on 03/12/2012 5:18:54 AM PDT by thackney
BP Exploration (Alaska) Inc. and Conoco Phillips Alaska told the Senate Resources Committee there are projects the companies could do on Alaska's North Slope to increase oil production, but those projects will have trouble attracting capital investment because of high state taxes.
Damien Bilbao, head of finance, developments and resources for BP, discussed a proposed reduction in the "progressivity" of the state oil production tax from 0.35 from 0.40. He told the committee: "A change of five-hundredth of a percentage point will not sway our investment decisions in Alaska." (He was discussing an earlier version of Senate Bill 192 than the one the committee approved on March 2.)
Bilbao repeated statements the company had previously made that "only a meaningful tax change, starting with bracketing around progressivity, will draw the additional investment that Alaska needs to put more oil in the pipe."
He said only proposed amendments to Senate Bill 192, which provided bracketing around progressivity, "provided meaningful tax change that would lead to increased investment in Alaska."
Those amendments, offered by Sen. Lesil McGuire, R-Anchorage, were not included in the committee substitute introduced March 2; McGuire and Resources co-Chair Tom Wagoner, R-Kenai, voted against moving the bill.
Voting to move the bill were co-Chair Joe Paskvan, D-Fairbanks, and Sens. Hollis French, D-Anchorage, Bert Stedman, R-Sitka, Gary Stevens, R-Kodiak, and Bill Wielechowski, D-Anchorage.
Stedman asked Bilbao about a two-tiered approach, recommended by the Legislature's consultants, in which legacy fields would be taxed at one rate and incremental production at a lower rate.
Bilbao said it is overall fiscal policy that matters. When BP looks at the fiscal policy and how it affects projects, he said, it looks at the project and the base business on which the new project would sit.
(Excerpt) Read more at adn.com ...
Alaskans don’t pay state or local taxes. They simply rape the oil companies. Is it right? Absolutely NOT.
They pay some local taxes, property taxes and sales tax in some areas (not Anchorage).
But your point is quite true.
FYI, there was a show on CNBC last night about Williston, ND and the effects of the oil boom on that town. It was worth watching. If I can find a link I will post it.
Maybe you should read Alaska’s constitution before you make a comment like that. If the state tax is the determinant of whether to drill or not then the return on investment is not high enough to drill with a reduction as small as that. Sorry, but the major oil companies are finally realizing they have been dragging their feet on production while the smaller oil and gas companies have gone ahead with fracking. They are now trying to play catch-up and trying to negotiate where they have little leverage.
Bad business decisions like Exxon’s purchase of XTO at an exorbitant premium when they could have bought into the domestic US basins at far lower cost leaves it with a legacy corporate issue they have to deal with themselves, not on the back of the Alaskan taxpayer.
Sorry, but the CHK’s and the EQT’s of the world need the tax break more than the XOM’s and CVX’s of the world do. At least they have been drilling all along.
Perhaps you should read it as well. That only deals with the royalties, which is not an issue or a concern. The royalties are in line with other areas.
The problem is the massive taxes piled upon top of the royalties. These taxes are NOT shared with the people, they only fund the government.
As an example, only oil & gas property pays state property tax. No other industry or property pays tax.
At current pricing, the total take for taxes, royalties to all agencies claiming a piece of the action is about 85% of the selling price. It is an insane amount.
It is also the reason places like North Dakota and Texas are booming for oil drilling and watching production rise, while Alaska continues to decline with little new drilling.
Money is fungible. If the residents are not paying state or local taxes because of the oil drilling taxes that is just as legit as higher royalties. If Alaska wants to utilize this approach, and they balance the budget, SO WHAT? Last I looked there is no right in the constitution (ours) to drilling oil. If the taxes are too high, GO ELSEWHERE. The majors were slow to realize the potential of fracking and let others buy up the best spots. TOO BAD!! They made a decision to not go ahead with drilling when oil prices were MUCH LOWER while others committed capital. Now when oil prices are much higher they complain about taxes??
Come on, learn some common sense.
So this previous governors administration claiming conservative credentials was more in favor of raising taxes than promoting jobs and local production.
If the taxes are too high, GO ELSEWHERE.
That was the point, they are. The new drilling in Alaska is dismal while those same operating companies expand production in Canada and other locations.
The majors were slow to realize the potential of fracking
That is ridiculous. Hydraulic fracturing has been used by EVERY major oil/gas company for decades.
“So this previous governors administration claiming conservative credentials was more in favor of raising taxes than promoting jobs and local production.”
COMPLETELY IRRELEVANT to this discussion.
“That is ridiculous. Hydraulic fracturing has been used by EVERY major oil/gas company for decades.”
But the latest explosion in production has been driven by the smaller companies, not the big boys. They sat on their leases and let others get the jump. Now they are playing catch-up and they don’t like that one bit.
As for not drilling in Alaska: these companies KNEW the RULES and the tax rates when they bought the leases.
There is plenty of drilling and expansion in this increase. ConocoPhillips is one I am dealing with.
As for not drilling in Alaska: these companies KNEW the RULES and the tax rates when they bought the leases.
Now maybe I can get you to understand. After they bought the lease, spent the money on drilling and building infrastructure, then Alaska raised the tax rates.
“Now maybe I can get you to understand. After they bought the lease, spent the money on drilling and building infrastructure, then Alaska raised the tax rates.”
Welcome to the world the rest of us deal with every day in business!!
As a financial advisor I deal with CHANGING tax rates, rules and compliance issues all the time. My underlying point is still valid:
If the rising world price of oil is not enough to offset these higher rates, look elsewhere. Like no other industry has had to write off sunken costs of an investment that has gone wrong because the rules changed . . .
They have. That is the point. While other areas in the US and other countries have a boom going on in new drilling for oil, Alaska lags greatly. While their state house and senate argue on and on, the problem remains. The current governor has been trying to lead them to get realistic but has been ineffective.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.