ANCHORAGE, Alaska — Just days after the Alaska Legislature lowered taxes on the oil industry, ConocoPhillips announced plans to boost investment on North Slope fields.
ConocoPhillips is planning to bring an additional rig to the Kuparuk field this spring and working with co-owners to fund a new drill site on the Kuparuk River field, the company said in a Wednesday announcement.
It’s also beginning the regulatory and permitting stage and starting engineering for the Greater Moose’s Tooth unit in the National Petroleum Reserve-Alaska.
“These are some examples of the activities ConocoPhillips plans to kick off in the near future to help bring new investments and produce more oil from legacy and satellite fields,” ConocoPhillips Alaska President Trond-Erik Johansen said in a release.
How much this would cost the company wasn’t immediately clear and probably wouldn’t be until the company completes it’s planning and engineering process.
“We don’t have hard numbers yet, but we are on a path to bring these for approval, and that’s good news,” company spokeswoman Natalie Lowman told The Associated Press.
The announcement came after lawmakers approved SB 21, championed by Gov. Sean Parnell as a way to address the trend of declining production on the North Slope. High oil prices the past few years have helped mask the decline.
Parnell’s third attempt to upend the former tax system, known as ACES, championed by former Gov. Sarah Palin was approved by lawmakers Sunday.
Parnell said he was encouraged by the announcement.
“We are seeing the first steps in Alaska’s oil comeback,” he said in an email to the AP.
“By creating a more competitive, stable tax system, Alaska is now positioned for a resurgence in investment. Alaskans will benefit from this increased investment announced by ConocoPhillips Alaska and its working interest owners in these fields,” Parnell said.
The new plan approved by lawmakers removes the progressive surcharge that has been credited with helping fatten state coffers and revamps offered credits with a goal of focusing them on new production. Oil companies had complained that the surcharge triggered when a company’s production tax value hits $30 a barrel cut too deeply into their profits when prices are high, discouraging new investment.
The bill passed Sunday includes a 35 percent base tax rate and $5 allowance per taxable barrel of oil produced. The allowance would apply to what would be considered new oil and production that also would qualify for a 20 percent tax break known as a gross revenue exclusion. Certain units comprised exclusively of leases with higher royalty rates, and those not getting royalty relief from the state, could qualify for a 30 percent tax break.
Administration officials have said they expect the vast majority of Alaska’s legacy fields would be subject to a 35 percent base rate and a per-barrel allowance on a sliding scale, which would be higher at lower prices and nothing when oil prices are high, about $160 a barrel.
Critics warn that this is nothing but a giveaway to Big Oil, and said the state treasury could suffer billions of dollars in losses over the next few years. ConocoPhillips executives had testified that they believed the tax changes would lead to additional production and investment but couldn’t quantify it at the time.
Lowman said the company didn’t identify these projects then because they were waiting for a final bill.
“Until it’s a done deal, we really don’t know how the economics affect all our projects,” Lowman said.
ConocoPhillips and others testified at the time that the bill, if passed, would make Alaska more attractive for investment.
“These are examples of projects that we have been prepared to do if meaningful changes were made to ACES,” she said. “With the passage of the bill and what we believe is a more attractive business climate, we’re now moving forward to aggressively advance these projects.”
Rep. Eric Feige, co-chair of the House Resources Committee, noted that this was the kind of investment that he expected to follow SB21.
“This is certainly a great start,” Feige, R-Chickaloon, said. “I expect that as they have the opportunity to run more projects up the company flagpole that we will probably see more of this kind of investment.”
Ray Metcalfe, a former state legislator, has announced that he is pursuing a public vote to overturn the new tax. The “Vote Yes! Repeal the Giveaway” organization plans a news conference Thursday afternoon in Anchorage to announce sponsors.