New oil tax pitched again, details still uncertain

Consultant looks at rates between 17.5 and 25 percent of net profits

Posted: Thursday, February 02, 2006

Gov. Frank Murkowski's lead oil and gas consultant on Wednesday made a second pitch to lawmakers to restructure the state's oil production tax, but details remained vague on when an actual proposal would be written and from where it would come.

Consultant Pedro van Meurs and Department of Revenue economist Roger Marks presented scenarios to House and Senate Finance members, along with more than a dozen other lawmakers in attendance, to demonstrate how much money the state would collect during high oil prices with a net profits tax.

It was a repeat of a presentation van Meurs made last month, but this time he examined tax rates between 17.5 percent and 25 percent of the oil companies' net profits, and tax credit rates between 15 percent and 20 percent.

In those scenarios, the state would take in anywhere between $1.1 billion and $2.6 billion more than it does now when oil is $60 per barrel.

North Slope crude closed Wednesday at $64.26.

"We talked about it and said if he's going to do the same thing over and over again, he's got to have numbers," said Senate President Ben Stevens, R-Anchorage.

Both van Meurs and Stevens said these rates presented were not necessarily what would be proposed in a bill. Van Meurs called it background information meant to help lawmakers' deliberations.

A net profits tax would be based on oil companies' gross production revenue from their wellheads, minus their capital and operating expenses, royalties and property taxes.

When the price of oil rises, so does the tax. It would also involve a system of credits when prices are low that could be traded.

Mark Hanley, public affairs manager for Anadarko Petroleum's Alaska operations, said a net profits tax could be constructed in a way that is fair to the oil industry, but details on Murkowski's idea have been few.

"It's impossible at this point to say if it's good, if it's bad or if it's indifferent," Hanley said.

Murkowski has said he wants to see a bill introduced this session, but has not said when. It also is not known whether the governor will introduce the bill or whether it will come from a legislative committee or an individual lawmaker.

Van Meurs said the legislation would have to be passed before negotiations for a natural gas pipeline deal is passed. The net profits tax would play into negotiations between the state and BP, ConocoPhillips and Exxon Mobil for a North Slope gas pipeline, but the tax would be a stand-alone law, he said.

A new tax could have consequences on the negotiations' progress to date.

Just ConocoPhillips has agreed to the base fiscal terms the state is proposing. Rep. Bruce Weyhrauch, R-Juneau, asked if ConocoPhillips would back out of that agreement if a net profits tax is implemented.

"It's possible," said Revenue Commissioner Bill Corbus. "The one company that has agreed to the gas pipeline agreement has not agreed on the (net profits tax)."

Trending this week:


© 2018. All Rights Reserved.  | Contact Us