Skip to main Content

Parnell takes swing at beefy oil tax cut for 3rd time

  • Author: Alex DeMarban
  • Updated: September 27, 2016
  • Published January 15, 2013

Gov. Sean Parnell will take his third swing at lowering taxes for oil companies, and it's a big one.

According to the Associated Press, Parnell is proposing overhauling the state's oil-production taxes by removing the progressive surcharge that companies have said hurts profits as oil prices rise, dissuading investment that yields new production.

Many details about the proposal are unknown, including the big question of how much it will cost Alaska. Past proposals submitted by Parnell, and rejected by the Senate, have asked for a tax break reaching $2 billion a year.

Will this one be more – or less -- than that? Stay tuned.

The proposal, submitted to the Legislature Tuesday, will keep the oil-production tax's 25 percent base rate on net profits. It will also give tax breaks for oil produced from new fields, including new areas of legacy fields such as Prudhoe Bay and Kuparuk, the AP reports.

Importantly, it will remove the surcharge that kicks in when monthly net profits reach $30 a barrel. That surcharge, created in 2007 during the Palin administration, crept up with profits, though the total production tax could not exceed 75 percent.

Here's a fact sheet explaining some of the proposal's concepts.

In recent years, the progressive tax padded Alaska coffers as oil prices soared past $100, bringing billions in extra revenue. Nonetheless, the Legislative Finance Division released a report this week warning that if spending remains flat, Alaska will face a budget deficit of $920 million in FY14, which begins in less than six months.

Alaska major oil producers -- BP, ExxonMobil and ConocoPhillips – continue to profit handsomely on Alaska's North Slope. That is, if ConocoPhillips, the only one of those companies to separately report its Alaska income, is any measure.

In the third quarter of 2012 Conoco took home $535 million, a $33 million improvement from the previous year's period, according to the Oct. 30 filing with the US Securities and Exchange Commission.

Oil companies that invested billions to remove Alaska oil now reap the benefits, something known as "harvest" mode. Conoco's take-home pay for the first nine months of 2012 was $1.7 billion, a 9 percent increase from the same period the year before, according to the filing.

Oil production has fallen in Alaska for more than 20 years. Parnell, who once headed up ConocoPhillips' government relations department, believes that lowering and simplifying the tax system will slow that decline.

Parnell also hopes to revamp the generous suite of tax credits currently offered by the state. Questions have been raised about what Alaska gets in return. Those credits could top $1 billion next fiscal year.

Contact Alex DeMarban at alex(at)

For more newsletters click here

Local news matters.

Support independent, local journalism in Alaska.