ConocoPhillips has begun a television and print advertising campaign in Alaska that opposes the state's plan to revise oil and natural gas taxes -- less than a month after the oil major appeared to endorse the proposed legislation. The tax revision plan, proposed by Gov. Frank Murkowski, is part of a two-prong strategy to develop the long-awaited natural gas pipeline from the North Slope to the Lower 48 (see NGI, Feb. 27).
Under Murkowski's proposal, producers would pay a 20% tax rate and receive a 20% tradable tax credit. Tax revenues would be lower when initial large capital investments were made and, consequently, higher as production increases. The tax also would provide a $73 million annual standard tax deduction as an incentive for oil and gas exploration by smaller independents.
The Alaska Legislature began hearings on proposed House Bill 488 earlier this month, and in testimony before the Alaska House and Senate Resources committees, Brian Wenzel, vice president of finance and administration for ConocoPhillips Alaska, said his company would reluctantly support the tax bill (see NGI, March 6).
"We'll reluctantly agree to 20%, but Alaska has to ask itself if that rate will result in the long-term future investment the state wants," Wenzel said. "We would oppose this bill except for the fact that it enabled all parties to come together in support of a contract." The bill "will move the gas pipeline contract to the next phase of development." He cautioned that with a higher tax rate, ConocoPhillips' development of higher-cost oilfields will be hampered.
"Anytime the government raises taxes, it is taking away money from the private sector that could be used for reinvestment and for continued job growth," said Wenzel. "While it's obvious that higher rates would negatively affect the oil and gas industry, we also believe those higher rates would not be in the long-term interest of the state."
The advertisements do not refer to the pending legislation. However, in the ConocoPhillips' television ad, a man says, "I don't see how additional taxation can do anything but discourage investment." Another man says, "I think the industry's been taxed enough." The newspaper advertisement carries the same theme, warning readers, "additional taxation can only hurt investment in our state," according to the Anchorage Daily News.
Murkowski spokeswoman Becky Hultberg said ConocoPhillips has been concerned about tax increases; however, she noted the producer had agreed to tax increases because with the revisions, the gas pipeline project will move forward. She told the News, "We respect their right to express their views, but we may not agree with those views or with their strategy."
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