Alaska’s most important oil company is telling the Legislature while it makes good money in Alaska under current tax rates, the state is going to have to make it even more profitable if it wants to increase its chances of more investment.
ConocoPhillips Alaska Vice President for External Affairs Scott Jepsen told legislators what is particularly troubling to the company when it makes investment decisions is the “progressivity” in Alaska’s Clear and Equitable Share Act oil tax regime.
ACES’ progressivity means tax rates go up when profits rise, and that makes the state less likely to attract investment, he said.
“ACES puts a haircut on your long-term profitability,” said Jepsen, discouraging investment in Alaska in favor of more profitable jurisdictions.
Under questioning from Sen. Bill Wielechowski, D-Anchorage, Jepsen acknowledged the company told Wall Street it was making “very good returns” on investments it was currently making in Alaska.
To encourage more development, though, the state should reduce taxes at high profit levels, he said.
“You can have a project that had a good rate of return,” but doesn’t get approved because “you don’t see the kind of upside you see elsewhere,” Jepsen said.
That’s because of Alaska’s progressivity, said Bob Heinrich, ConocoPhillips Alaska vice-president for finance.
“Progressivity is the problem, from ConocoPhillips perspective,” he said.
Even lower taxes are not always enough, Jepsen said. Sometimes there are problems with getting permits for projects, while other times there are projects the company would like to do but the camps are already full of workers busy doing other things, Jepsen said.
“There are a lot of people on the (North) Slope right now, bed space is at a premium,” he said.
Jepsen declined to identify projects that have been stopped by ACES, or to provide specific returns the company needs to justify new projects.
He called that information “proprietary.”
Jepsen also declined to promise any new projects if Parnell’s proposal is adopted, but said it would likely change the risk-reward ratio overall.
Even Parnell’s House Bill 110, now stalled in the Senate, may not be enough, he said.
“We view the governor’s proposal as a good first step,” he said.
ConocoPhillips is the largest oil producer in Alaska, operating the Kuparuk and Alpine fields and owning a share of the huge Prudhoe Bay field. It recently won federal approval to develop the CD5 development west of Alpine in the National Petroleum Reserve-Alaska.
Alaska has been trying to spur new exploration, with some apparent success, with Parnell saying he also wants to provide incentives to the oil companies to pump the remaining oil from the state’s aging reservoirs at a faster rate.
Jepsen agreed that was the best way to boost production.
“There’s no better place to look for oil than where you’ve already found it,” he said.
Jepsen also provided an update with what ConocoPhillips was doing with the fields it already operates, including Kuparuk, where it is learning how to develop its viscous and heavy oil at the West Sak Field.
“They’re just extraordinary challenges from a commercial and technical perspective,” Jepsen said.
Lower taxes may mean more development there, he said.
ConocoPhillips also discovered the Alpine field on the western North Slope, and is continuing to expand and develop it, Jepsen said.
It was the largest onshore discovery in the U.S. since the 1970s.
Resources Committee member Sen. Hollis French, D-Anchorage, used the discussion of Alpine to mention that he’d toured it a number of years ago.
French, a critic of Parnell’s tax cuts, said he still remembered who it was who showed him around Alpine.
“A guy named Sean Parnell was our tour guide from ConocoPhillips,” French said.
After Parnell served in the Legislature in 1990s he worked as ConocoPhillips’ governmental affairs director in Alaska.
• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com.
Comments (76)
Add commentWRONG!
Lies. All lies by Conoco.
Notice the vague language: "...investment will be LIKELY....lower taxes MAY mean more development..."
translation:
They promise nothing in return for $2 billion/year cuts in taxes/royalties.
Nothing.
ACES IS WORKING! LEAVE IT ALONE!
This is nothing more than greed. They are making billions. They want billions more, and they have a lapdog and former lobbyist in the Governor's office to make it happen.
And when asked about how many jobs Conoco has lost due to ACES, his response was that information was "proprietary."
...translation...
ZERO jobs were lost, but we thought we'd make that claim anyway in order to give the impression that ACES kills jobs. But if we would have actually lost 1000 jobs because of ACES, we'd be screaming that number loudly.
"proprietary." It's like pleading the fifth amendment.
Stand strong senators! This is nothing more than big oil attacking our tax base and Alaska's future. The infrastructure is there. The pipeline is there. The oil sure is there.
They won't be abandoning us as they claim.
If anything, we should raise taxes on them every time they whine for a tax cut.
Shame on every House member who voted for this tax cut. You nearly gave away billions of dollars. Thank God the Senate did its homework.
Shocking statements
“Progressivity is the problem, from ConocoPhillips perspective,”
I would expect them to say nothing else.
“We view the governor’s proposal as a good first step,”
To what? Zero royalties, I expect.
I'm sure the oil companies have a well-used playbook for dealing with third-world countries, where they bribe the government leaders and spread disinformation to the masses in order exploit their resources on the cheap. Looks like they are using that same strategy here.
Think Parnell, as governor, is above such crass incentives? Think again. Just look at Palin, who bailed on the governorship in order to chase the $$. These guys are human too, with all of the human failings. They need to earn our trust, and Sean Parnell has not done that.
No projects; just profits
Jepsen also declined to promise any new projects if Parnell’s proposal is adopted, but said it would likely change the risk-reward ratio overall.
He means more profit and higher dividends for shareholders.
And as far as the Parnell regime's propaganda about employment on the slope being hit hard by ACES:
"...the camps are already full of workers busy doing other things, Jepsen said.
“There are a lot of people on the (North) Slope right now, bed space is at a premium,” he said.
Next!!
Ok, so you wont promise any new projects, you cant name any projects that have been stopped by ACES, your making very good returns on investments in Alaska and employment on the north slope is high? Next! Oh, and by the way, you can have Parnell back as your tour guide
Other Solutions
There are other solutions for Conoco. The State should tell them if they are not happy with the tax structure, they are free to leave and the State will take over the development. After all that oil and gas does not belong to Conoco, it belongs to the people of Alaska. If they cant seem to develope it, take it away from them.
Jo
I really have to agree with every single thing you said on this one. Parnell is nothing better than a snake oil salesman....
Guarantee?
If we pass the tax reduction we guarantee that they get a tax break. What can they guarantee for us? Tit for tat. Pro quid pro. This for that...Alaska is not in the business of charity for companies making billions in revenue each year.
I'm not sure what the rush is
I'm not sure what the rush is to pump the oil out. It's not like the oil has a shelf life. I understand the pipeline does have a lifetime but the oil in the ground will only become more and more valuable as demand increases and supply gets used up.
Cost of business
The bbl price is almost 3x what it was 10 years ago, have their costs gone up in kind? I doubt it. Of course they are a business that has to return a profit to its shareholders so they have to fight for lower taxes/costs, the "progessivity tax" doesn't seem fair to me, nor does paying $4/gal at the pump. Oil and gas are as much a necessary commodity as water and electricity and the price should be regulated as well. The excessive profits that oil/gas companies have made over the past 10-20 years on market manipulation is insane. They can talk about the cost of doing business, but really they pass that all along to the consumer- you and me.
..the cojones these Conoco
..the cojones these Conoco guys have knows no bounds. Their frustration levels must be great as even having their boy in office isn`t making hay for them. The state senate has stood to keep truth as visible as possible in defending the state`s position in the discussion. ALL of the discussion. The monopoly on the slope in the legacy fields don`t know the meaning of the word "no" when it comes to shaking down this state and it`s people for more money, pitting one faction of Alaskans against the other in a race to fiscal bankruptcy for Alaska. And for what?? A wing and a promise and a "pig-in-a-poke"? Have they forgotten what a CONTRACT is?? What they said they would do in their leases? This is the exact same old unsupported song and dance, spin and obfuscated numbers, they gave us last year, and the year before that,.. all the while making record profits in the midst of the worse recession since the 1932 depression. This is like Deja-Vu "all over again". ACES is working. It`s neigh impossible to shut down or slow the industry public-relations machine. It never stops. It has an agenda and a quota and armies of attorneys devoted solely to that end (getting easy profits through extortion rather than pump oil, or gas, like they are supposed to). No tax deduction without a commensurate increase in production!! It`s called business. We`re either partners, and open and honest, or not. To this point they have been deceptive to a fault. If we`re going to mess with ACES we should do a proper state agency audit to confirm industry claims, before we go giving away the farm.
ArtVandelay is correct
I'm a republican and supported Munoz, but I won't be voting for her the next time she runs. She's supposed to be smart and she's supposed to represent us. Voting with big oil against the peoples' interests indicates she's either a shill or an ignoramus. However you cut it, she's demonstrated that she's the wrong person for the job.
PeytonPlaceAk
When I saw that the elected representative from our election district, Rep. Munoz, voted to support HB110, I sent a message to our Representative saying it was "political prostitution." That evening, within minutes I got a phone call from her father, Elton Engstrom, former Republican legislator telling me I should apologize for what I said to his daughter.
I thought people had elected Munoz to be our representative, not her father.
@ Wally
Don't apologize.
If I was ever contacted by a legislator's father or relative about something I said to that legislator, I would consider that nothing less than harassment and I would call the state police.
I would also tell her father, "Cathy is an adult. If she has something to say to me, she has my contact information. You can STFU."
The audacity of her father to do that is incredible. It borders on intimidation.
Cathy does seem to be a little invisible since her vote, or is it my imagination? She needs to justify herself in an op ed or something. Juneau is not happy with her vote.
You are right. The legislators work for US.
Don't apologize. Instead, challenge Cathy to prove you wrong.
Why is it wrong?
Ok let me ask why is the tax cuts wrong?
Ok so the state government will have 2 billion dollars less a year to operate on,so what cause thats a great thing with a smaller government spending $$ on stupid bull crap and yes the social services need to be cut back anyways.
And less state employees are a good thing too.
It's not like if they pay lower taxes the precious pfd will go down in pay outs cause that's mostly from the stock market anyways..
So can anyone say why a smaller government is a bad thing?
And why with a state with less than a million people the state budget is so huge?
Jo
Cathy is not invisible. She just voted for February to be American Heart month. She is content to waste time on meaningless bills. Her record last session was horrific and it seems it will continue this session.
Why are tax cuts wrong?
Well maybe if it were you personally and someone said, "Hey give me X amount of dollars, but I'm not going to promise anything. Just give me the money." Would you just give someone money who promised nothing in return? That's the real question.
I have a wonderful offer for you. Give me two or three thousand dollars, don't ask what I will do in return, just give me the money. You can put it in a brown paper bag and leave it at my doorstep and then hope I will do something in return.
Others may also contribute to my worldwide campaign called "Make the world better for me."
Thank you.
Well wmolsen
They are doing something they are doing business in this state and have you worked on the slope? More than a hitch or two at all?
Well ConocoPhillips does a lot up there for the people in Barrow and in nuiqsit it might not be in Juneau they offer free primerib dinners and such.
But they are also providing jobs to many Alaskans that which you living here in Juneau most likely do not work there..
Again why is it wrong for the state government to collect less tax to work with?
Are you one sponging off the system wmolsen do live in one of the many state subsidized apartments or are you one to have your food subsidized by the state is that why you feel it wrong?
And not many people here pay the state tax..
Jaymz73
It's wrong because districts are having to cut teaching jobs all across the state. Then people like yourself and AKDONN berate the education system for not producing better results. It's wrong because ConocoPhillips netted 12.4 billion dollars last year. I'm sorry but a couple prime rib dinners isn't worth Alaska getting strip-mined of its resources while towns such as Barrow and Nuiqsit pay some of the highest fuel and gas prices in the country. It's wrong on so many levels but mainly because it's a free handout to some of the worst corporations on the planet...
This is a tax reduction not a tax exemption
It's a reduction not an exemption..
And the scho system wastes so much $$$
Throwing $$$ at the schools isn't going to fix it..
Time and history has proven that..
Well that argument is like the state saying you made this much and we want our cut for the other sponges in alaska..
So again what is wrong with 2 billion dollars less in state coffers to support the welfare state that we have?
And yes with a tax cut the state will still collecting tax and royalties off the oil..
State tax?
What do you mean by, "not many people here pay the State tax" because last I looked there wasn't a State tax.
And if
Your life is subsidized by the state or are another state employee that can't work the private sector then I can see how you would think this is a bad thing....
The state tax is for business owners
So yes there are a few people that do pay a state tax.
Understandable that you would think there isn't a state tax but yes those who own a small business in this state are taxed very high..
jamz73
No I never worked for the oil companies on the north slope. However I did work for the DEWline at Bar main way back in 1965-66. Food was great ! Yes, the DEWline stations helped the local people in nearby villages in many ways.I have lived in small towns, cities and villages in Alaska. But that was before the oil industry.
Tax cuts are wrong if someone says, "Just give tax cuts to some industry profiting from Alaska's resources, " and "Let's hope and pray that they do something in return to benefit Alaska." That hasn't happened. The only message we get from the Governor and oil industry is "Give us a tax break." Nothing more - nada.
Now that I have revealed the fact that I have lived in the interior of Alaska, worked on the North Coast before the oil industry, lived on the west coast of Alaska in a small village for a winter, please tell me and others your living experiences in Alaska.... have you ever lived in a village with no grants, no government assistance and had to make a living as I and many others have done? Have you learned to speak the languages or even parts or words from a Native language, as I have done?
I don't live in a state-subsidized apartment. I did build a log home and paid off that mortgage, I now live in a condo and paid off that mortgage.... all in Alaska over fifty years. I'm sure you must have done the same.
If you want to criticize people on speculation, then people should know exactly from which you speak.
If Conoco can't make a go of it they can leave...
If there's oil available in those fields or elsewhere in Alaska, it has value and someone will be willing to extract it. People of Alaska should remember they hold most of the cards in this situation. Conoco makes empty threats that they will be forced to invest elsewhere and move operations, call their bluff and see what happens. By the way, when they say "invest" are they referring to drilling operations or the politicians they buy? Those investments can gladly go away.
Again why is a smaller state government bad
At least the profits from ConocoPhillips will go to a lot of the shareholders of you want some of that $$$ buy shares
Again 2 billion less in tax revenue is a great thing for the people.
Less government means less intrusion into our lives..
Look what Washington state did to Boeing they taxes them to death so they moved their corporate headquarters to another more tax friendly state...
Look what California has done by over taxing companies there and now more than ever they are moving to more tax friendly states..
By screaming this is so wrong why not think why is this wrong for the government to receive less?
And it's a tax break not an exemption so yes the state is still getting something on top o the royalties..
Ever wonder how Colorado or the dakota's are luring more oil exploration than Alaska?
And less state jobs is a consequence of this but there are many private sector jobs out there.
@Jaymz73: given that your
@Jaymz73: given that your grasp of the English language is tenuous at best, I question why you think you have any qualification whatsoever to hold opinions about complex economic and governmental policy matters, subjects which you also apparently have a barely tenuous grasp of.
Corporations are out to maximize their own profit. As such, they should be ignored when giving their input on issues that pertain to those of us who aren't shareholders.
Small business owners don't pay State taxes
Small Business owners pay Business and Personal Property taxes as well as Property Taxes (if they own buildings/lands) to their Municipality. They might also collect sales tax to be remitted to the Municipality, but again, that is at the local level.
Royalties are not taxes
The oil in the ground belongs to the citizens of the state of Alaska. Oil companies extracting our state resources pay us a royalty to do so.
The oil companies don't provide jobs to Alaskans out of the goodness of their hearts. They do it because there is no other way to get the oil and make the record profits they are making. It is a symbiotic relationship - both parties benefit. It is not a parasite/producer relationship no matter how many times FOXNews says it is.
You certainly have strong opinions, James73, most of which don't seem to be backed up with any factual evidence. You have an accusatory tone which generally means you have weak evidence for your case.
There may be good reasons to reduce the royalties oil companies pay for our resources, but I'm not sure how many people would give away something for nothing, as you are advocating. It brings to mind the say "a fool and his money are soon parted."
jamz73
Were you living in Alaska back in the 1960's when we all paid a school tax and State Income tax? I was and felt that paying my fair share on a very limited income for working for myself in private industry was just a fair thing to do because I and others benefited from being residents of a State.
After years in rural Alaska, I was recommended for a job with the State, got the job, earned a graduate degree at the University of Alaska then went outside for two years to get a post graduate degree, came back and spent decades teaching. Oh yes, I retired after paying into a retirement plan for years.
I'm sure you must have done the same.... came here with nothing, worked with no grants or guaranteed salary for years, lived in rural Alaska, and then got a job and paid into a retirement system.
Oh, by the way I have been a small business person in a publishing business, paid for my business license, taxes and all the rest. Evidently you too have done these things and that is how you gained your great wisdom about Alaska.
By the way.....what has your life in Alaska been like???
Jaymz73
I'm assuming you are either Sean Parnell or Mr. Conoco J. Phillips himself.