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Conoco pans Dems’ plan to tax gas Spokesman questions measure’s constitutionality, says lost interest would offset any tax credits from plan Anne Sutton Associated Press Writer
A plan to tax oil companies as long as Alaska’s natural gas remains untapped would penalize ConocoPhillips despite its willingness to move forward on construction of a natural gas pipeline, an oil company executive said Jan. 25.
Jack Griffin, vice president of external affairs for ConocoPhillips Alaska, testified against the bill that would tax North Slope companies $1 billion for every year they didn’t deliver the gas to market.
Sponsors of the bill, Anchorage Democrats Eric Croft and Harry Crawford, said the measure would help spur construction of a natural gas pipeline. They also have as backup a proposed citizen’s initiative that would levy the same $1 billion tax on oil companies.
ConocoPhillips, the state’s biggest oil producer, says it has reached a tentative agreement with the state on fiscal terms for the joint pipeline project.
Griffin said the project cannot move forward, however, without the economies of scale that would result from an agreement with all three of the major producers. Those talks with ExxonMobil and BP are still under way with the governor’s office. $200M tax even with cooperation Griffin told the House Ways and Means Committee that ConocoPhillips has worked cooperatively with the governor and Legislature, but even so, it would be taxed an estimated $200 million a year for the next 10 to 25 years.
“This tax is automatic and unavoidable. If we started welding steel and laying pipe tomorrow, we could not avoid this new tax,” he said.
The bill would be repealed if a pipeline were built. At that time, oil companies could claim credit for some of the taxes they would have paid.
The producers estimate it would take at least 10 years from the time an agreement was reached to begin flowing gas through a pipeline.
Griffin said by that time lost interest on the tax payments and other factors would significantly offset any refund.
He added that requiring a private company to spend billions of dollars whether or not the investment makes sense is an unprecedented use of the state’s taxing authority, one he suggested may run afoul of state and federal constitutions. Croft says producers could recoup Rep. Norm Rokeberg, R- Anchorage, agreed. He told Griffin it appeared “grossly unfair to point a pistol at your head when common sense requires you move forward.”
But bill sponsors say the companies have reason to stall for competitive purposes while they develop gas reserves in other parts of the world.
Croft said producers could recoup the entire tax “if they move quickly.”
“And every year they will start to pay more, and more so, if they do put it on hold, they will start to pay without any hope of getting it back,” he said.
Croft said a similar tax on oil producers in the 1970s helped spur the flow of oil from Prudhoe Bay.
Committee chairman Bruce Weyhrauch, R-Juneau, said he will continue to hold meetings on the bill. He said the committee will expand its meeting schedule to include Monday meetings in order to address its busy calendar.
The bill is House Bill 223.
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