BP exec warns taxes could scuttle Alaska pipeline
Tue Apr 25, 2006 12:31 AM ET
yahoo.reuters.com
ANCHORAGE, Alaska, April 24 (Reuters) - As Alaska lawmakers debate a bill to overhaul the state's oil production tax, a BP (BP.L: Quote, Profile, Research) executive cautioned politicians on Monday that setting taxes too high would scuttle an agreement for a $20 billion natural gas pipeline.
BP Alaska President Steve Marshall said state lawmakers threatened to upset "a very finely balanced agreement" hammered out by Gov. Frank Murkowski and major oil producers on the state's North Slope with an overly ambitious tax plan.
"We've got a lot of momentum and it would be a shame to have to stop that and start all over again," Marshall told the Alaska Support Industry Alliance, an association of oil-field service companies.
An unappealing tax bill to oil producers would undermine the two years of negotiations needed to reach an agreement to build the pipeline to carry natural gas to the lower 48 U.S. states, the BP executive said.
State politicians argue that Alaska needs a new tax plan to capture better returns from higher oil prices.
Murkowski's proposal would link taxes to oil company profits but would partially offset the effectively higher tax with a series of investment credits. The governor seeks to have his tax plan rolled into a decades-long fiscal contract for the gas pipeline.
A version of the tax bill passed late Monday in the state Senate with a slightly higher tax rate and tighter restrictions on investment credits than the governor's original bill.
The altered version of the tax is still subject to change on Tuesday, when the state Senate reconsiders the bill, and if passed at that time the bill would then move to the House where more changes are likely, according to state legislators.
Marshall said BP and the other main North Slope producers agreed to Murkowski's plan to overhaul state production taxes because of a promise of tax stability needed for the pipeline.
"Why would anybody agree to a doubling of these production taxes if they didn't want to get something for it? And that something is the gas line," Marshall said.
Murkowski critics in the legislature said state politicians needed more information about the still-secret gas pipeline contract to fully understand the link between the oil taxes and the new pipeline deal.
Senator Hollis French, an Anchorage Democrat, filed a court motion to force Murkowski to make the gas pipeline agreement public, but no legal decision has been reached.
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