Conoco Phillips' profits from its Alaska oil production dropped last year but stood out as the biggest single contributor to the company's global oil production income, according to new financial statements.

Democratic lawmakers in Juneau seized on Conoco's income statements this week as a weapon in their battle to fend off some Republican lawmakers' and oil industry efforts to roll back the state's oil-tax changes made during the Palin administration. Approved by the Legislature in 2007, the tax law boosts the state's share of windfall oil profits but it has been fingered by Conoco and BP executives for their recent budget slashing on the North Slope. A new ad campaign paid for by The Alliance, an oil-field contractor group, claims the tax law has caused the oil companies to lay off hundreds of Alaska workers.

State economists say Alaska did start to lose some oil jobs in the second half of last year and will probably lose hundreds more this year. Still, they say, 2008 and 2009 were peak years for oil industry employment in Alaska.

"When oil investment and jobs have increased, oil companies should tell the truth, even if it hurts their call for more tax breaks," said Rep. Les Gara, D-Anchorage.

In response, Conoco officials said they and their contractors did cut jobs in 2009 and that oil industry spending on the major North Slope oil fields is declining now. And, they said, Gara and the other Democrats are misinterpreting their financial statements.

Conoco's Alaska profits looked more impressive last year because low natural gas prices in the Lower 48 and overseas pulled down profits in those places, said Brian Wenzel, Conoco Phillips' Alaska vice president for finance.

"If you go back to 2008, you find the opposite," he said.

A CLOSER LOOK

Conoco's financial statements filed with the U.S. Securities and Exchange Commission provide a rare view into North Slope oil profits. The Conoco filings give Alaskans a chance to see how the company's investments in the state measure up against Conoco's Lower 48 and international oil and gas fields. Other big North Slope producers either don't break out their Alaska operations in SEC filings or do so in much less detail than Conoco provides.

The new SEC filings show how important Alaska is to Houston-based Conoco's global business. Last year, Conoco earned a $1.54 billion profit from Alaska oil and gas production, about 30 percent of its worldwide profits.

The company lost $37 million on its Lower 48 production last year, but those numbers don't jibe well with Alaska because most of the Lower 48 production is from natural gas rather than oil and natural gas prices plummeted last year.

How much money is the company paying in taxes? The results for 2009 aren't available yet but in 2008, Conoco paid $3.4 billion in taxes in Alaska. Its Alaska profits for the year were $2.3 billion.

UP OR DOWN?

Depending on whose numbers you use, Alaska's oil industry is either perking along or on a downward slide.

Taxes are just one factor. Global oil prices are an even bigger one. When prices dropped last winter, oil companies around the world began a budget-cutting spree. In Alaska, Conoco cut 80 jobs last year.

Industry employment is one area in which people argue over the numbers.

On one hand, the number of oil industry jobs has been at record levels in 2008 and 2009. But the number of those jobs started slipping in the middle of last year, registering the first decline in about six years, according to Alaska Department of Labor statistics. Still, oil industry employment remains higher than it was when the legislators approved the tax reforms. And state economists predict employment this year will remain at "above-average levels."

Oil industry spending in Alaska has increased since the 2007 passage of the tax-law rewrite called the Alaska's Clear and Equitable Share act, dubbed ACES, according to the state Department of Revenue. That's mostly due to new projects like Exxon's Point Thomson field rather than new investment at the major older fields such as Kuparuk and Prudhoe Bay.

But at the same time, drilling activity declined somewhat, with companies filing fewer permits and drilling fewer holes last year. State officials say those trends don't seem to correlate well with the passage of ACES -- the decline in drilling began some years earlier.

LESS DRILLING

Democratic lawmakers point to exploration by some smaller companies on the North Slope as a sign that ACES is working, but BP and Conoco say that the entire region's future prospects are in jeopardy if drilling continues to ebb at Prudhoe and Kuparuk.

"Drilling is what supports future production and it's down a lot since ACES passed," said Steve Rinehart, BP's Alaska spokesman.

BP says it will cut its Alaska capital budget by 15 percent this year, to $850 million. BP Alaska has cut its capital spending for the last two years but this year's budget is higher than the company's 2007 spending.

"Our total drill footage is going to be more than 50 percent less in 2010 than it was in 2007, when we drilled a million (vertical) feet," Rinehart said.

"It's worth keeping in mind that this is a global business. You tend to put your capital where it gets the best return. Alaska in our view is not globally competitive," he said.

He offered the Gulf of Mexico as a region where BP can get a better return on its oil investments than it can in Alaska.

Conoco has not yet announced its 2010 Alaska budget this year but company officials said they don't expect any major changes in employment. The company does not plan to drill any exploration wells this year, the first time that it hasn't drilled in 45 years.