Alaska Governor seen proposing new oil production tax Tuesday

Anchorage (Platts)--21Feb2006

Alaska Governor Frank Murkowski will likely introduce a new net profits
tax on state oil production to the state Legislature February 21, observers
said Monday. Presentation of the tax proposal was originally planned for
February 16 but was delayed when ConocoPhillips CEO Jim Mulva asked to meet
with Murkowski. The governor met with representatives of ConocoPhillips, BP
and ExxonMobil, the three major North Slope oil producers, in Anchorage on
February 20.
     The new tax will replace Alaska's existing production tax, which is a
percentage of gross revenues modified by an incentive formula, or Economic
Limit Factor, which Murkowski says is obsolete under current market
conditions. Legislators are anxious to make the change, arguing that the
current tax structure does not allow the state to capture much of the benefit
from the high crude oil prices that have prevailed in recent months.
     Producers hope to link the oil tax change to a proposed gas pipeline
contract with the state reported to be in final stages of negotiation.
Ultimately producers would like to freeze both state oil and gas tax rates.
     A source within the state administration said the governor is considering
a tax rate of 25% on net field revenues. The tax would be accompanied by a 15%
investment tax credit, which would mitigate effects of the tax for companies
that reinvest in Alaska.
--Tim Bradner, newsdesk@platts.com

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