The president of BP America responded to Gov. Bill Walker's recent claim that the state's new oil production tax is costing Alaska hundreds of millions of dollars, telling a pro-industry group on Friday that the energy giant doesn't fall under that category.
"BP pays more in production taxes than we receive in credits, despite what you see in the papers," said John Minge, referring to a recent opinion column submitted to media by the new governor.
Walker wrote in his article, "The hard truth about Alaska's oil revenue," that policymakers who passed Senate Bill 21 after a long stretch of high oil prices in 2013 gave little consideration to the effect low oil prices would have on Alaska's budget.
Now that oil prices have tanked, falling by half in recent months, Alaska suddenly faces a $3.5 billion deficit.
Walker said the state will pay out $500 million more in tax incentives this year and next than it will receive in production taxes.
Calling it "irresponsible" and "unsustainable," he said the state is not meeting its constitutional mandate to develop its resources for the maximum benefit of its residents. In addition to cutting costs, he said he would work to assess the state's revenue stream.
Walker's article tapped into residual anger over the oil tax rewrite. Voters approved the new law in a referendum this summer, but some are still angry it replaced Alaska's Clear and Equitable Share, which brought billions of surplus dollars into the state treasury when oil prices and production were higher.
Oil industry supporters, meanwhile, say the new law has spurred new investment in Alaska's aging oil fields. Minge's presentation, "It's Working, Alaska," a reference to the new law, came at an annual meeting of the Alaska Support Industry Alliance at the Dena'ina Convention and Civic Center.
Attending the conference and trade show was incoming Senate President Kevin Meyer, who said the issue of the credits is worth studying to determine which companies are receiving those credits.
"I'm hoping it's just a short-term thing but it's a serious matter so we'll take a look at it," he said.
He said he believes most of the credits are going to smaller independent oil companies that the governor has expressed support for helping.
There are also questions of how much of the credits were carried over from the previous tax law and how much is going to companies working on the big fields on the North Slope and those working in Cook Inlet.
The state's fiscal situation is "concerning," Meyer said, but "at low oil prices, that's when you want to incentivize the oil companies to invest more money."
Randy Hoffbeck, the state's new revenue commissioner, who also spoke at the conference, said Walker is going to review the credits like any good businessman, but he said the credits will remain.
"We'll be writing a check this year for about $100 million more than we collect in production tax, but in our view that's a cash-flow issue," he said. "That's an issue driven by oil price and it's not necessarily something that's inherently wrong with the credit program.
"The credits will stay in place."
Minge said BP has increased its effort to produce more oil on the North Slope as a result of the tax overhaul and said Alaskans need to move past the debate over which law is better.
"The issue is not Senate Bill 21 vs. ACES," he said. "It's the fact that prices dropped and there's not enough production as there could be."
Minge said his statement that BP pays the state more in production taxes than it receives in credits refers only to BP, not the numerous other oil companies that operate in Alaska.
Asked if Minge would provide details showing BP paid more, BP Alaska spokeswoman Dawn Patience said the company does not provide that level of detail because of taxpayer confidentiality rules.
Minge said he'd be concerned if steps were made to change the state's tax policy. Doing so would force companies to go back to the drawing board to determine if projects would pan out.
"Preserving what has been accomplished is so, so critical to the future of this state," he said.
Many at the conference said they were waiting to hear from the governor on how he hoped to raise revenues. Kevin Durling, president of the Alaska Support Industry Alliance, said he is not reading anything into the governor's statements.
"I've been around a long time, and I've heard a lot of saber-rattling from different legislators and governors over the years," he said. "It's important to give him the opportunity to see what he does."
Durling said it's also too early to judge the new tax law and that it's important the state control wasteful spending until the price of oil rebounds. He said the new tax law has led to increased employment for many companies and that it brings more money to the state at low oil prices than the old tax law would have.
"You have a course you need to reach," he said. "You don't change the direction of your ship every time the winds change."