Senate hears more on proposed oil tax

Posted: Sunday, March 19, 2006

JUNEAU - Major oil companies operating in Alaska and state administrators took issue Saturday with a proposed tax they said concentrates on short-term revenues for the state at the expense of long-term investment in the oil patch.

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The Senate Resources Committee's changes to Gov. Frank Murkowski's net-profits tax bill could speed the decline of oil production on the North Slope and jeopardize efforts to build a gas pipeline, said various administration and industry officials.

Revenue Commissioner Bill Corbus said the proposal would upset the careful balance the governor struck between higher taxes and investment incentives.

"The level of investment the state needs will not occur unless there is a balanced and enlightened tax climate," he said.

Oil production - now averaging 870,000 barrels a day - is expected to decline to 772,000 barrels a day by 2016, said Corbus. New fields or expansion of existing fields would slow the rate of decline.

The Senate committee's version of the bill would change the governor's base tax rate from 20 percent to 25 percent, while retaining a 20 percent tax credit on capital investments.

Pedro van Meurs, the administration's lead consultant, said oil company investments - which amounted to about $1 billion a year over the last five years - would likely stay the same under the Senate proposal.

Under the governor's "more competitive" proposal, however, investments would be more likely to increase, according to Van Meurs, who could not say by how much.

Van Meurs warned the committee that he was unable to fully analyze the committee's changes to the bill because some concepts were either "too confusing" or were in the process of being further revised.

The original bill would allow oil companies to claim the last five years of capital investments as tax credits. The committee proposes instead giving producers a $1 credit for investments made in the last five years for every $2 invested in the future.

The committee will hear from small producers and other stakeholders on Sunday and from the public on Monday.

The bill is expected to move to the Senate Finance Committee by the end of the week.

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