HOUSTON – By a slim margin, Alaska’s new business-friendly oil tax regime has survived an effort to overturn it and revert to a previous tax structure that cost companies more.
A measure on the state’s primary ballot Tuesday would have reinstated Alaska’s progressive oil taxes, originally installed in 2007 under former Gov. Sarah Palin and dismantled last year in an effort to lure oil companies to the state. The old taxes were tied to crude prices, and oil companies say they would have hampered the industry’s new plans for investments in the state’s lagging oil production.
Some companies had said they might pull out of Alaska operations if the measure passed. Unlike any other state, Alaska owns all of its subsurface rights and is bound by its state constitution to receive the maximum benefit from all of its resources. Opponents of the tax scheme adopted last year, which the ballot measure would have repealed, characterized it as a giveaway to Big Oil that could cost the state $1 billion per year in state tax revenue.
With all of Alaska’s 441 precincts reporting early Thursday, voters rejected the measure to roll back the new tax plans by 52 percent to 48 percent, according to a state website that publishes the voting results.
Nick Moe, a spokesman for Repeal the Giveaway, an advocacy group backing the measure, said its effort fell short but brought together a coalition of conservatives and progressives like Vic Fischer, one of the original signers of the state’s constitution, to send a message that Alaskans can work together to solve its public funding problems.
“We want to see oil profits reinvested in our state,” Moe said.
Meanwhile, ConocoPhillips and BP, the two biggest oil producers in the state, called the vote a victory.
“Alaskans have made clear they are interested in moving forward and improving Alaska’s long-term economic future,” Janet Weiss, BP’s Alaska regional president, said in a written statement. “We agree with the voters that oil tax reform is working, and BP is committed to doing its part to make sure that continues.”
Together, the biggest oil companies in Alaska had spent $15 million on a media campaign to sway the vote.
BP had said earlier this year the new tax code enables it to invest $1 billion in Prudhoe Bay, a giant oil field that has produced 12 billion barrels of oil over several decades and could pump 12 billion more before it is spent. The London-based oil company said it would deploy two more rigs to Prudhoe Bay over the next two years and drill up to 40 new wells each year.
BP also is considering another $3 billion in projects in Alaska – investments that might raise its production by 40,000 barrels a day, it has said.
Before the vote, Weiss had said if the measure passed, BP would have “to go back and look at the economics of all the projects enabled by the Alaska tax reform.”
Houston-based oil producer ConocoPhillips has said it plans to spend $2 billion to drill more wells in two other big Alaskan oil fields, the Alpine and the Kuparuk, potentially adding 17,000 barrels a day to its output in the state.
The new tax plan “has improved the investment climate in Alaska and provides the basis for a more positive long-term outlook for Alaska’s economic future,” ConocoPhillips spokeswoman Andrea Urbanek said in an emailed statement. “ConocoPhillips has added rigs to its operations and announced plans to invest in projects that will add production, create jobs and business opportunities for Alaskans.”