As the battle over cutting oil taxes heats up in Juneau, Alaska's largest oil producer released a statement saying it paid $3.7 billion in taxes and royalties to the state in 2012 -- but still earned a hefty $2.3 billion.
The press release came after ConocoPhillips's headquarters in Houston, Tex., announced fourth-quarter profits of $1.4 billion for its global operations. For the quarter, ConocoPhillips in Alaska took home $570 million, an increase from the third-quarter showing in Alaska of $535 million. The step-up resulted in part from slowed production during the warmer months due to planned maintenance.
The tax burden in Alaska, combined with $1.2 billion paid in federal taxes for its Alaska operation, means ConocoPhillips Alaska paid a total of $4.9 billion in taxes and royalties.
“The fourth-quarter earnings continue the general trend where we pay twice as much in taxes as we keep,” Bob Heinrich, vice president of finance for ConocoPhillips Alaska, said in the release. “We are hopeful that the governor and Legislature will be successful in creating a better business climate on the North Slope.”
In fiscal year 2012 -- running from July 1, 2011 to June 30, 2012 -- the state collected $9.9 billion in taxes and fees from the oil industry, representing 73 percent of total state revenue of $13.6 billion.
The administration of former Gov. Sarah Palin increased taxes on oil companies in 2007 by creating a windfall tax atop a 25 percent base rate that increases as the price of oil rose. The money helped fill Alaska's treasury, but oil companies have complained they're paying too much. Gov. Sean Parnell has introduced legislation to remove the "progressive" portion of the tax so producing oil companies pay a flat 25 percent tax on net profits.
ExxonMobil and BP, Alaska's two other major producers, don't separately report their Alaska income. Lowered taxes are expected to provide each company with hundreds of millions of dollars of additional revenue each year.
An opponent of Parnell’s proposed tax cut, Sen. Bill Wielechowski, D-Anchorage, said Conoco's “blockbuster” profits demonstrate the current tax structure is working for both producers and the state. “It’s gratifying to see Alaska’s major oil producers reaping substantial profits under our existing oil tax structure at the same time as Alaskans enjoy their fair share of oil revenue,” Wielechowski said.
Wielechowski said the company earned much more in Alaska than the company did at its Lower 48 and Latin America operations, which he said combined for $157 million in fourth-quarter profits and $713 million for the year. He also broke Conoco’s Alaska earnings down into smaller chunks.
“That’s $6.3 million in profits each and every day of the year,” Senator Wielechowski said. “Put another way, this one oil company earned $262,500 an hour in Alaska last year, which is staggering.”
Parnell says the lowered taxes will lead to increased production. But BP, Exxon and Conoco have refused to specifiy exactly what they'll do to increase production in Alaska if the legislature passes Parnell’s tax cut.
A state tax official on Thursday who might be able to verify Conoco's claims did not immediately return a phone call to the Dispatch.
Contact Alex DeMarban at alex(at)alaskadispatch.com