Representatives from ConocoPhillips appeared before the Alaska Legislature Wednesday, saying they needed to earn higher profits in Alaska if they’re going to invest more in the state.
The meeting of the House Resources Committee came the same week the company announced near-record profits in Alaska.
“ConocoPhillips does make money in Alaska, that’s why we’re here,” said Dan Clark, the company’s Alaska manager for strategy and portfolio management.
The company reported earlier it has made $616 million in profits in Alaska during the quarter that ended March 30. Wednesday, Scott Jepsen, vice president for external affairs, said the company during that same time paid $1.5 billion in state and federal taxes and royalties.
While ConocoPhillips’ profits on existing operations are higher than average in Alaska, that’s because most of the big investments have already been made. In addition, the comparison to Lower 48 profits includes natural gas operations that are being hurt by low prices for that commodity.
That amount of taxation in Alaska is holding ConocoPhillips back from making new investment in Alaska, he said.
Alaska’s ACES oil tax system takes a larger share at current high prices, but drops dramatically at lower prices.
That element, called “progressivity,” was designed to ensure new projects in Alaska would remain profitable even at low prices.
Now, under high prices, ConocoPhillips and other companies say that inability to see high profits in Alaska means they want to invest elsewhere
“Without progressivity, you’d see a lot more investment coming to Alaska,” Jepsen said.
Despite answering almost every question with a pitch for lower taxes, Jepson and Clark resisted pleas for information on which new projects would be made profitable enough under Gov. Sean Parnell’s now-withdrawn House Bill 3001 or other tax cut proposals.
“Could you give examples of ConocoPhillips’ decisions to not go forward with certain projects because of ACES?” asked Rep. Cathy Muñoz, R-Juneau, and a Resources Committee member.
Jepsen cited a project on the Southeast Eastern West Sak, which he said was currently under development.
That’s a challenging project with both technical and financial hurdles to overcome, he said.
“We may pursue part of that even under ACES,” Jepsen said. “That’s probably true for most things were looking at.”
The difficulty in identifying specific projects is each involves as “suite of factors” on which decisions must be made, he said.
Jepsen has one specific piece of advice, which was to include the legacy fields such as Prudhoe Bay and Kuparuk, under any tax incentives.
If the state is going to slow the North Slope’s production decline, it has to use Prudhoe Bay to do it, he said.
“It’s by far and away the largest resource we have,” Jepsen said.
Jepsen, however, strongly resisted saying how much higher profits would have to be to dramatically increase investment.
But if Alaska wants more investment, it needs to make those investments even more profitable, he said.
“Alaska could do a lot to improve its position when we take a look at those opportunities if it had a change in the fiscal framework,” he said.
The company is still committed to Alaska, and has even bought new leases, but may not develop them without reduced taxes, he said.
While ConocoPhillips has been making higher profits in Alaska, it is not investing in those low-margin ventures elsewhere that are dragging down Lower 48 profits,” he said.
“We’re not investing in gas,” he said. “In some places we’re shutting in gas because we are not making any money there.”
• Contact reporter Pat Forgey at 523-2250 or at email@example.com.