Alaska firms file appeal on ELF tax hike

The Prudhoe Bay oil producers are appealing a new Alaska tax hike.

BP Exploration (Alaska), ConocoPhillips and ExxonMobil filed an administrative appeal in March to February’s change in how Alaska assesses oil production taxes for six Prudhoe Bay satellite oil fields.

That change raises the producers’ taxes between $150 million and $190 million per year when oil is at $42 per barrel. North Slope crude closed March 24 at $50.96 per barrel.

Six satellite oil fields were combined with the giant Prudhoe Bay field in calculating the economic limit factor, a complex formula used to provide tax relief for smaller fields or wells that produce less oil.

Those six fields, which produce a combined 85,000 barrels per day, had paid little or no production tax because of that formula, known as the ELF. But, state officials say, their ELF calculations were changed to be included with Prudhoe Bay because they were acting as one unit with the large oil field.

BP spokesman Daren Beaudo said the companies’ appeal covers three general areas: Two of the satellite fields produce viscous oil, which Gov. Frank Murkowski had said would be exempt; changing the ELF hurts Alaska’s investment climate; and the oil companies invested in those satellite fields based on the previous way the ELF had been calculated. ConocoPhillips spokeswoman Dawn Patience said her company does not believe the state has the authority under Alaska law to raise the tax.

Dan Dickinson, the director of the state tax division, said the producers’ appeal will go through an informal conference, which typically takes months to conclude but has lasted as long as seven years in one case.

—The Associated Press