Galvin: Alaska’s new tax won’t cause oil companies to pull investments

The three major oil companies that operate on Alaska’s North Slope say they are reviewing their investments in Alaska now that they’ll have to pay more taxes, but state Revenue Commissioner Patrick Galvin on Dec. 28 treated the statements as a bluff.

“We believe that the incentives that are included in the tax program, the resources that are available on the North Slope, and the tremendous value that oil is getting in the market right now are all reasons why Alaska will remain a very attractive place to invest,” he said. “I don’t expect to see a reduction in investment, given the attractiveness of Alaska.”

Exxon Mobil Corp. recently joined BP and ConocoPhillips in saying it would review its Alaska investments in light of the tax hike, with Exxon media relations advisor, Kimberly Brasington, writing in an e-mail Dec. 28 that the new tax “reduces the attractiveness of future oil developments” in Alaska. “We are re-evaluating investment plans,” she said.

BP and Exxon have not said outright whether the tax increase would lead to a reduction in investment.

Galvin told the Anchorage Daily News he expected the companies to reassess their investments and suggested they were letting people know as a way of opposing the tax hike.

He said the tax rate is only one of an array of factors oil companies consider when deciding where to invest.

Lawmakers increased the base rate of the profits-based tax from 22.5 percent to 25 percent, and changed how quickly the tax rate increased when oil prices are high. Lawmakers approved the new tax Nov. 16 and Gov. Sarah Palin signed it into law earlier in December.

Under changes made in 2006, the Department of Revenue is required to study the effects of the oil production tax on exploration, development, and production of oil and submit a report to the Alaska Legislature by the first day of the 2011 legislative session.

—The Associated Press