Alaska governor reduces oil profit tax plan

By MATT VOLZ
Associated Press writer

JUNEAU, Alaska -- Gov. Frank Murkowski reduced his proposed tax rate on oil company net profits to encourage more exploration in Alaska over time, his chief aide said Wednesday.

Chief of Staff Jim Clark told The Associated Press he recommended Murkowski lower the proposed rate from 25 percent to 20 percent. The difference between the two rates would be about $300 million to the state per year, said Pedro van Meurs, the governor's lead oil and gas consultant.

Although the state would get less revenue in the short term, there would be a more incentive for oil explorers to develop Alaska's smaller fields at the lower rate. That would mean more revenue over the long term, Clark said.

Legislative critics have accused Murkowski of lowering the rate under pressure from the three largest oil producers after their senior executives flew to Anchorage on Monday to meet with the governor.

But Clark said the decision was made on Sunday, as a way to "tilt the field" toward smaller explorers. The governor's negotiators have talked to smaller Alaska producers such as Anadarko Petroleum Inc. and Kerr-McGee Corp. on several tax rates, but they were not consulted before the decision was made, Clark said.

Murkowski's bill would scrap the state's current production tax, which the governor calls outdated, and replace it with one based on a percentage of the companies' net profits. The bill also calls for a 20 percent tax credit for the oil companies' reinvestment in Alaska.

The governor's proposal would bring between $301 million and $773 million more to the state next year than the current tax if the price of oil averages between $40 and $60 per barrel, according to a state Tax Division analysis.

The oil tax overhaul has been linked to finalizing a deal with Exxon Mobil Corp., BP PLC and ConocoPhillips on fiscal terms to develop the North Slope's 35 trillion cubic feet of proven natural gas reserves.

Murkowski has been negotiating with the three companies for more than a year. Locking up oil and natural gas fiscal issues with the state is one of several conditions in building the gas line, which would run along the Alaska Highway through Canada and to markets in the Midwest.