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Oil execs warn against industry tax hikes

Posted: Tuesday, July 16, 2002

ANCHORAGE (AP) -- Alaska oil industry executives are urging Alaska politicians to look elsewhere for solutions to the state's fiscal gap.

A parade of oil industry executives spoke Monday to the Anchorage Chamber of Commerce, saying that the next governor and Legislature should erase the looming threat of higher taxes or royalties on oil and gas produced in the state.

Worries that the state might seek to solve its mounting revenue shortfalls by extracting more from big oil is threatening continued industry investment in Alaska and could even kill some projects now evolving, the executives said.

Charles Pierce, vice president of Unocal Corp., suggested the new governor, to be elected in November, use his or her veto power to freeze oil tax and royalties for four years. That would make oil industry executives feel more secure about investing big dollars on Alaska projects, he said.

Another executive, Kevin Meyers, president of Phillips Alaska Inc., echoed the desire for a stable tax and regulatory climate.

''It will be very tempting to come after the familiar target -- the oil and gas industry,'' Meyers said. That would be a big mistake, he said.

The overall theme was an old one in Alaska. A large share of the state budget comes from taxes and royalties on oil and gas pumped from state lands. But in recent years, the gap between spending and available money has widened. And although oil production from the North Slope today is holding steady at about 1 million barrels a day, that is only half of what production once was.

This year, lawmakers in Juneau weighed painful new income, sales and other taxes on Alaskans to close an expected budget gap of nearly $1 billion. Rumbling in the background was the possibility of jacking up taxes on oil.

In the end, lawmakers dipped into a reserve fund to close the gap. But that reserve isn't expected to last many more years. The oil industry fears it could be forced to pay more.

Executives with BP, new player EnCana Corp., Exxon Mobil, Tesoro and the Alyeska Pipeline Service Co. all said the uncertainty about new taxes must be removed.

Jack Williams, Alaska production manager for Exxon Mobil, also said the oil industry is concerned about regulatory delays, such as the time and effort needed to get permits for new projects.

He laid out plans for possibly developing the Point Thomson oil and gas field on the North Slope, just west of the Arctic National Wildlife Refuge. If Exxon Mobil decides to go forward with that project it could pump $2.5 billion into state and local governments over its lifetime. But not with a bunch of permitting delays, he said.

''I don't want to sound alarmist, but delays and uncertainty could very well kill this project,'' Williams said. The company is expected to make a decision in early 2004 on whether to proceed with the project.



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