ConocoPhillips Alaska, Inc. (CPA), the largest producer of oil in Alaska, earned $551 million in the 49th state in the second quarter, but paid approximately $1.25 billion in taxes and royalties on its operations here to the state and federal government.
The company’s tax bill included $983 million paid to the State of Alaska in severance taxes, royalties, property taxes, and state income tax, or $11 million per day. Since a new oil production tax structure was put in place in 2007, the trend continues in which the company pays approximately twice as much to the State as it earns.
“The very high government take on the North Slope created by Alaska’s tax structure negatively impacts the investment climate,” said Bob Heinrich, vice president of finance for CPA. “We believe a better balance between government and producer share would stimulate additional investment in legacy fields and increases in production and jobs.”
Strong margins for oil along with attractive development opportunities have resulted in ConocoPhillips’ capital budget in the Lower 48 increasing from $1.6 billion in 2010 to $4.8 billion in 2012. Conversely, the company’s capital budget in Alaska has remained essentially flat at approximately $900 million per year.
CPA had net earnings of $551 million in the second quarter of 2012. This amount was down from $620 million in the first quarter primarily due to lower sales volumes and slightly lower crude prices.
Last year CPA paid $4.1 billion to Alaska in taxes and royalties and nearly $1 billion to the federal government for a total tax and royalty bill of $5 billion. It’s net earnings came in at $2 billion for the year.
In the first half of 2012, CPA’s estimated taxes and royalties due to Alaska is $2.2 billion, and that rises to $2.8 billion when federal income taxes are included. First half earnings are $1.2 billion.
Anchorage Senator Cathy Giessel warned that the latest revenue report from CPA is showing that oil companies are focusing more and more outside Alaska due to the State’s big tax bite. “The money’s going south, where companies see the most upside,” Giessel said. “Obviously they don’t see that in Alaska under this tax regime.”
Giessel noted when other taxes and royalties are factored in, CPA’s total government take for the past quarter was approximately 70 percent. “During this year, the company is on track to pay the State nearly twice what it will keep in profit from its Alaska business,” she added.
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