Oil Tax Debate Continues

Dan Bross, KUAC – Fairbanks

The President of Conoco Phillips Alaska made his case for lower state oil taxes before the Fairbanks Chamber of Commerce yesterday.  Trond Erik Johansen pushed for tax reductions proposed by Governor Sean Parnell, including breaks for development of new fields and a reduction in the rate at which the state’s production tax goes up with the price of oil. Johansen said cutting back the progressivity factor is the fastest way to get more oil in the Trans Alaska Pipeline, because it would leverage development in existing fields.

Johansen said oil company investment in Alaska is flat, and that each well is bringing up less oil. He said the easy oil has been produced and companies need to invest more to develop thicker oil from aging fields like Prudhoe and Kuparuk.

Johansen said that’s driving development spending to places with less progressive tax rates like North Dakota and Alberta, Canada.   He said the industry is making good money in Alaska, but that the state’s future hinges on tax cuts to stimulate new investment.

Johansen said it takes five to 10 years before new development projects result in increased oil flow, and that if the state delays too long, new oil won’t be available fast enough to avert low flow, freeze up issues with the pipeline.

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