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BP pays Alaska $18 million in tax settlement Agreement follows audits of 2000, 2001 taxes and changes in how production valued after BP acquired ARCO refineries that process Alaska crude oil Mary Pemberton Associated Press Writer
BP Exploration (Alaska) Inc. has agreed to pay the state of Alaska $18 million to settle a dispute over taxes.
The money was to be deposited Aug. 26 into the state’s Constitutional Budget Reserve Fund, the fund Alaska uses to bridge gaps in the state budget. Alaska relies on oil for more than 80 percent of its general fund revenue.
Specific terms and conditions of the agreement were not released.
The settlement concerned BP’s tax obligation for 2000 and 2001. BP and the state disagreed over the amount BP should pay in production taxes from North Slope oil coming from Prudhoe Bay and several smaller fields at Kuparuk, Endicott, North Star and Milne Point.
“This agreement represents a significant achievement in that it provides clarity on BP’s tax obligations pertaining to new issues,” Steve Marshall, president of BP Exploration (Alaska), said in a statement.
The dispute was over the value the company placed on the oil at the wellhead, minus certain costs, including operations and transportation, said BP spokesman Daren Beaudo. The oil company pays taxes based upon the wellhead costs.
“We filed in good faith what we thought that value was and the state disagreed,” Beaudo said. “Whenever you are dealing with large sums of money I don’t think it is unusual to have a disagreement.” Problem goes back to ARCO refinery acquisition The problem goes back to 2000 when BP acquired ARCO and began refining its own oil with refineries at Carson in Los Angeles and Cherry Point in Washington, said Dan Dickinson, director of the tax division in the Alaska Department of Revenue.
The change in the way the company was doing business also required a change in the way the production taxes were calculated, he said. Up until that time, BP Exploration (Alaska) had been selling its oil to a third party to do the refining, he said.
The settlement agreement is helpful to both the state and BP in clearing up any confusion about the company’s tax obligation in the future, said Gov. Frank Murkowski.
“The departments of Revenue and Law worked with BP to craft a fair settlement that avoids protracted hearings and lawsuits that could drag on for years,” he said.
The state currently is auditing BP for 2002 and 2003.
Alaska receives money from oil fields through production, property and income taxes, as well as royalties. The state receives about $1 billion a year in oil and gas money, Dickinson said.
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