Oil execs: Projects hang on policy

Oil companies want assurances the state won't raise their taxes

Posted: Tuesday, June 15, 2004

ANCHORAGE, Alaska - Oil and gas executives say future expansion in Alaska largely depends on the state's ability to work out a sound fiscal policy that doesn't include higher taxes for them.

The theme of a better regulatory atmosphere, repeated Monday by representatives of four companies operating in the state, comes a week before Alaska lawmakers enter a special session called by Gov. Frank Murkowski to work on his proposed fiscal plan.

Executives from ConocoPhillips Alaska Inc., BP Exploration (Alaska), Marathon Oil and Pioneer Natural Resources Alaska spoke Monday at an Anchorage Chamber of Commerce luncheon, where they were asked to forecast the industry's next 10 years.

Most optimistically predicted an increase in exploration, pointing to the potential for drilling in the National Petroleum Reserve-Alaska, employing new technology to draw from existing fields and building a natural gas pipeline.

But, they said, industry-friendly governmental policies are needed to offset the risk and high cost of undertaking these large projects in Alaska's remote North Slope.

"It's a challenging environment to achieve investment returns," said Ken Sheffield, president of Pioneer Natural Resources Alaska Inc.

Kevin Meyers, ConocoPhillips Alaska president, said a big question for the industry's future in the state is when and how Alaska solves its chronic fiscal gap. Lawmakers who want to lean more heavily on oil and gas taxes do so at the risk of the industry's future in the state, he said.

John Barnes, Marathon Oil's Alaska business unit manager, also said the regulatory environment and tax uncertainty are the biggest risks now being faced by the industry.

Among the big projects, Meyers said he believes a natural gas pipeline can be operating by 2014 - if market prices stay high, if federal fiscal legislation passes and if a good deal is worked out with the state.

Steve Marshall, president of BP Alaska, also pointed out the benefits of finding a way to recover the North Slope's stranded gas.

"It would be a real shame if we can't find a way to commercialize that," he said.

But, Marshall said, much depends on the decisions made in Juneau.

Murkowski, who also spoke at the luncheon, said afterward the industry executives were sending message to legislators, although the luncheon was not deliberately timed to coincide with next week's special session.

Murkowski predicted oil and gas discoveries in NPR-A, off the coast of the Arctic National Wildlife Refuge and elsewhere in Alaska within the next 10 years.

But, he said, "that will be harder if we don't put the state's fiscal house in order."



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