Alaska Gov. Frank Murkowski (R), while falling short of calling for a windfall profits tax, has called for a new net profits tax that would squeeze progressively more money from oil companies as gas prices go up.
Murkowski would tax net profits at 20 percent, while continuing to collect corporate income taxes, property taxes, and royalties from oil companies. The net profits tax would replace a current tax on production that is not tied to oil prices.
“The Petroleum Production Tax [PPT] will be assessed on oil production profits,” Murkowski explained in a January 27 column he wrote for the Juneau Empire. “It will provide tax credits for new investment. Its profit-sharing regime will significantly increase state tax revenues when oil prices are high. Equally important, the PPT will provide new tax increases for development to keep Alaska competitive worldwide,” because funding from the new taxes (generally collected from development of large oil fields) will subsidize small company development of small-to-medium size Alaska oil fields that otherwise would be uneconomical to develop.
Brian Wenzel, vice president of finance and administration for Conoco Phillips Alaska, told Alaska lawmakers he reluctantly supported the proposal, but only because it is tied to a proposal that would facilitate building a new natural gas pipeline.
“We would oppose this bill except for the fact that it enabled all parties to come together in support of a contract that will move the gas pipeline contract to the next phase of development,” Wenzel told legislators during January 27 hearings, according to a report in the February 28 Anchorage Daily News.
Steve MacDowell, a spokesman for British Petroleum’s gas division, expressed similar sentiments for an April 26, 2005 article in the Seattle Post-Intelligencer, saying he supported the proposal in its current form but feared the legislature might modify it in ways that would make it unacceptable.
Those fears appear to have been validated already, as legislators in both the House and Senate have introduced bills to impose a 30 percent, rather than 20 percent, tax on net profits.
“It is absolutely staggering the amount of money the oil companies already pay in taxes,” said Scott Hodge, president of the Tax Foundation. “Government has profited more from the oil industry than the oil industry has profited from consumers.”
— H. Sterling Burnett
H. Sterling Burnett, Ph.D., is the Director of the Arthur B. Robinson Center on Climate and Environmental Policy and the managing editor of Environment & Climate News.
