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Report says Alaska most profitable region for ConocoPhillips, by far

An Alaska state senator on Friday said generous tax benefits for oil producers must end after a legislative report he requested found Alaska is by far the most profitable region in ConocoPhillips' global portfolio.

A ConocoPhillips spokeswoman countered that Alaska's cost of supply is actually on the higher end of the company's global investments.

The report, dated May 1 and released by Legislative Research Services, said "Alaska is the most profitable region for the company by a wide margin," based on the value of barrels of oil equivalent.

Barrels of oil equivalent is a common unit of energy companies use when reporting oil and natural gas production. The two types of fuel pack different levels of energy.

Sen. Bill Wielechowski, D-Anchorage, requested the report from the nonpartisan research division. Alaska Senate Democrats released it Friday.

At two pages, it includes a short summary, and lists ConocoPhillips' earnings in six regions around the world.

ConocoPhillips reported net earnings of $445 million in Alaska in the first quarter of 2018, the report says. Globally, the company's net earnings were $1.14 billion during the period.

ConocoPhillips reported net income of $26.18 for each barrel of oil equivalent produced in Alaska, the highest amount globally, the report shows. The Asia Pacific and Middle East, reported by the company as a single region, came in next at $13.01 a barrel.

Amy Burnett, a ConocoPhillips Alaska spokeswoman, said the company has higher per-barrel earnings in Alaska primarily because the company's Alaska production is almost entirely oil. Other regions have a higher proportion of lower-price natural gas, or natural gas liquids, she said.

Alaska's cost of supply ranks high for the company when all expenses are considered, including capital investments, she said.

"Trying to compare the profitability of the various regions on a single metric is an apples-to-oranges comparison," Burnett said of the report's per-barrel comparisons.

Wielechowski said Alaska needs to end the per-barrel credit, an amount the state allows oil producers to deduct from their taxes. Doing so would save the state about $1 billion annually, according to the state's revenue forecast, he said.

The money could help the state shrink its budget deficit, and counter efforts in the Legislature to reduce the Permanent Fund Earnings Reserve and the dividends paid to Alaskans, he said.

Burnett said the existing tax system has been key to helping keep Alaska's overall cost-structure competitive. She said ConocoPhillips kept investing in Alaska, even when prices were lower than they are now.

"Increasing taxes will increase costs and make Alaska less competitive," she said, adding that means less capital investment, fewer jobs and less long-term state revenue.

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