ConocoPhillips stands ready to invest substantially in Alaska to increase petroleum production if the state changes its tax structure, the company chairman and chief executive said Thursday.
Jim Mulva said he embraces Gov. Sean Parnell's recommendation for immediately changing Alaska tax law and his company is ready to move forward with support for North Slope projects already identified, such as a gas partial-processing plant and a new drill pad with 50 new wells.
"Meaningful improvements in the business environment are needed this year," Mulva said, emphasizing the time frame. "We need to do it this year because it impacts investment next year, next year, next year."
Mulva spoke before a pro-industry crowd in Anchorage. But the arena for change is in Juneau, where Alaska's petroleum tax structure has been the Legislature's No. 1 issue. The state House last week approved a bill making changes, but Senate leaders have said they will not act before the 2011 session is scheduled to end April 17.
Parnell's proposal is estimated to cost state government up to $2 billion annually and critics contend Parnell has not made the case that the substantial tax break will compute to new investment, only additional profits to petroleum companies.
In a statement issued late Thursday, Parnell said he hoped Alaska senators listened to Mulva's comments.
"Lower oil taxes will make Alaska more competitive and invite billions in new investment, creating thousands of new jobs," the governor said, adding, "I urge the Senate to take this announcement to heart and act."
Upward of 90 percent of state government general fund revenue comes from the petroleum industry. High oil prices have kept state coffers overflowing, including a projected $3.4 billion surplus for the next fiscal year but the main source, wells on the North Slope, continues to decline in production. The trans-Alaska pipeline operates at less than one-third capacity at about 600,000 barrels per day.
Mulva addressed a breakfast meeting sponsored by the Make Alaska Competitive Coalition, a group of businesses in the petroleum support industry and others that are backing tax change.
Parnell announced a goal of boosting that to 1 million barrels per day within 10 years and Mulva said his company agrees with aiming high.
"We support such a goal to help unite the industry and the state on a common platform," he said.
Changes are needed first, he said.
"These include dialing back the effects of increasingly progressive surcharge tax," Mulva said. "It needs to be fair and balanced, though. We understand that."
Improving tax credits to spur new well activity also is essential, he said.
"Our past investments cannot sustain Alaska's economy in the future," he said. "The past investments that we've made in our fields will not sustain us for 10, 20, 30 years in the future."
In turn, ConocoPhillips will commit to do more to help bring Alaska's challenged oil to the market in the medium term, he said.
"We will proactively pursue more North Slope projects that can move the needle on production while employing Alaskans and creating new opportunities for local business."
The gas partial processing plant and the drill pad were projects brought forward in 2007 with Prudhoe Bay's other two large operators, BP and Exxon Mobil. The pad would support 50 new wells and relieve a bottleneck at existing wells. The projects would represent an investment of as much as $2 billion.
Mulva also promised that ConocoPhillips would aggressively pursue satellite developments.
"They're commercially challenged, but with some help, new paradigms as proposed by the governor, we really think these additional satellites should be commercially developed, and that adds incremental production."
Former Alaska Gov. Tony Knowles preceded Mulva and said the bellwether of industry interest is the amount of exploration going on. With just one exploration well planned in 2011, he said, Alaska will see the lowest level of exploration since 1977 while exploration is thriving in Lower 48 states.
Exploration is tied to competition and taxes, he said.
"It shouldn't be hard to connect the dots," Knowles said.