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Alaska oil producers reap $5 billion

In the news

Posted: Wednesday, June 29, 2005

JUNEAU, Alaska (AP) — Oil producers made $5 billion in Alaska and the state collected $3.19 billion in taxes from the industry during the 2005 fiscal year, according to the Alaska Department of Revenue.

The gap between oil company profits and taxes was more than twice the size of the previous fiscal year, when the industry reported $3.1 billion in oil profits and paid $2.4 billion in state taxes, officials said Thursday.

The nearly $2 billion gap is a reason to ask for an equal share, said Rep. Les Gara, D-Anchorage, who requested the figures from the department.

''It's our oil,'' he said.

Under Alaska's taxation system with the oil companies, when prices are low, the state makes a lot of money and when prices are high, oil companies' percentage rises.

''Oil companies make tons and tons of money, and the state makes tons of money,'' said Mike Chambers, a spokesman for Gov. Frank Murkowski.

Gara said the state should look into a plan that exercises a minimum 5 percent severance tax on $20 a barrel and adjust the percentage higher according to the rise the price but never exceeding 25 percent.

Under Gara's plan, outlined in House Bill 63, the state would be collecting $500 million more this year, he said.

The Murkowski administration and members of the legislative majority said they prefer that the state's cut be steady.

The system in effect now, known as the economic limit factor, or ELF, calculates tax percentages based on output of oil. Companies are taxed up to 15 percent on fields that produce a maximum amount of oil.

But companies do not have to pay taxes on wells that produce less than the minimum, such as is the case for 11 of 14 fields that have come on line since 1989, Gara said.

''The way it is defined now, you would have to have a blockbuster field to pay the full 15 percent,'' Gara said. He said no field reached higher than 13 percent during this fiscal year.

Rep. Ralph Samuels, R-Anchorage, who is involved in the state's natural gas pipeline negotiations, said if there is ever a permanent shift in the way oil is priced, then the Alaska Legislature should look into the idea of raising taxes. But now the economy is too uncertain to shift any more risk toward the state.

''I don't want to bet the farm on it,'' Samuels said.

Murkowski rewrote tax rules in February so ELF included six satellite fields near Prudhoe Bay.

Prudhoe Bay oil producers — BP Exploration (Alaska) Inc., ConocoPhillips and Exxon Mobil — objected to the inclusion and filed an administrative appeal, which is still under review.

Oil companies also have argued that increasing taxes would hurt future exploration and development in Alaska.

Gara said oil companies give all profit made over $20 a barrel to shareholders. Technology has also made production cheaper.

''It's the oil companies crying wolf,'' Gara said.

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Information from: Juneau Empire, http://www.juneauempire.com



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