JUNEAU -- In the view of the Parnell administration, the increase in oil taxes approved by lawmakers in 2007 has not stymied oil industry investment in Alaska and just needs minor tweaks.

But some of the big oil producers say just the opposite. As they see it, the tax on oil profits is holding back investment and will accelerate decline in Alaska oil production.

Now senators on the Finance Committee -- which would have a major role in any change in oil taxes -- are sifting through conflicting perspectives and colliding PowerPoint presentations generated during days of hearings on Alaska's oil and gas taxes.

About 87 percent of the state's general fund revenue comes from oil taxes, but North Slope production is declining, and senators are assessing the tax's impact.

"Quite frankly the stakes are extremely high," said state Sen. Bert Stedman, a Republican from Sitka who co-chairs the Finance Committee. "If the trend is as negative as the industry portrays it in Prudhoe and Kuparuk, we'll see significant reductions in production, which means effects on our treasury."

Area senators are trying to understand is how the oil producers are using the tax credit provisions of the 2007 tax. Is investment mainly for upgrades to existing fields? Are the credits encouraging new drilling? What's happening at the giant but aging fields of Prudhoe Bay and Kuparuk compared to smaller, new fields?

Getting to the bottom line is difficult because much of the tax data is confidential and can't be released to the general public or even to legislators making the decisions, Stedman told reporters Tuesday.

The tax is known as ACES, for Alaska's Clear and Equitable Share. There's a base tax of 25 percent on oil profits, plus progressively higher tax rates as the per-barrel value of oil rises that can reach 50 percent or even higher under very high oil prices. At the same time, producers get tax credits for capital spending, which Gov. Sean Parnell is proposing to increase and extend to all drilling and well-work expenditures.

After days of presentations by administration officials and consultants, senators on Tuesday heard concerns about the tax from Conoco Phillips Alaska and an industry trade group. The system of increasing taxes when prices are high dampens incentive to undertake risky and costly exploration, tax credits or not, the industry leaders said.

Marilyn Crockett, executive director of the Alaska Oil and Gas Association with 14 member companies, called her presentation "The Failings of the 'ACES' Production Tax."

"The tax rates under ACES are too high and overshoot the optimum point where state revenues, Alaska jobs and economic growth are maximized" for the remaining life of the fields, Crockett said, reading prepared testimony.

But when Stedman asked her for specifics, she said her talk was an overview and she wasn't prepared to go into detail about that.

The oil industry simply hasn't proved that there's a problem with the progressive tax rate, according to administration officials, who support the 2007 tax.

"Overall investment is up," Revenue Commissioner Pat Galvin said Tuesday evening in an interview. "Industry has not yet provided evidence that ACES is a disincentive to investment decisions." And, he said, the investment is not mainly in required maintenance and repairs -- there's drilling as well.

Still, Crockett along with Wendy King, vice president of external affairs for Conoco Phillips Alaska, did list some examples in their testimony to the Senate committee:

• Conoco's net income for the third quarter of 2008, when oil prices were at a historic high, was about the same as for the last quarter of 2009, when oil was selling for half of what it had been, King told senators.

"So for us, on the bottom line, we ... went through a very high price cycle and did not see that translate back to our net income," King said. Conoco alone paid $3.4 billion in taxes, not counting income taxes, to Alaska in 2008, she said.

• The administration points to increased capital expenditures on Alaska's North Slope, but many of those projects were under way before ACES was passed into law, Crockett said.

• The number of wells drilled at existing fields dropped from 166 in 2007 to 153 in 2008 to 147 last year, Crockett said. She quoted statements by John Minge, president of BP Exploration (Alaska) Inc., that the company expects to drop the number of feet it is drilling in existing fields by more than 50 percent this year compared to 2007, and has reduced its count of drilling rigs on the North Slope from 10 to seven.

BP runs most of the North Slope's oil fields on behalf of itself and other oil companies, and spokesman Steve Rinehart said in an interview Tuesday that the company's capital investment in Alaska was dropping 15 percent this year, down from $1 billion to about $850 million, partly because of the 2007 tax structure.

The investment will be split nearly evenly between maintaining and upgrading existing facilities; new projects including the Liberty oil field, which is not covered by ACES; and drilling, mainly in existing fields.

"The way to reduce decline is to increase production," Rinehart said. "The way to increase production is to increase investment. In our view, ACES discourages investment" by taking away the opportunity to collect when prices are high.

Rinehart said BP intends to remain a long-term player.

"We're not proposing any little fixes here or little fixes there. We were glad to see that the governor is engaged on this subject. We don't think his credits proposal gets to the heart of the matter."

The conversation itself is changing. Oil companies used to refer to "upside potential" in discussing big new oil finds, Galvin said. Now they use that or similar terms in talking about high oil prices, he said

The senators, still struggling to get the bottom of the conflicting perspectives, said they are worried about what will happen if the companies don't invest in new production.

"It's a volume game. We need more oil out of the ground," Stedman said. "We could have a first-class system above the ground but if we don't have any oil to put in it, it doesn't do us any good."

Sen. Charlie Huggins, a Wasilla Republican on the Finance Committee, told reporters that he was struck by a statement from Conoco that the industry will need to spend $40 billion over the next 10 years just to maintain a 6 percent decline in North Slope production. The administration is forecasting a much lower rate of decline, which may need even more investment. "Unfortunately it appears to me that the investment picture is headed in a different direction. That should be alarming to all of us as Alaskans," Huggins said. "There will be echoes through the years for the lack of investment in this year, and next year, and other years going forward."

So they continue to sort out whether jobs are up or down, whether investment is up or down and the like. Stedman told reporters his committee members need as much information as possible before deciding what if anything needs to change.