Question du Jour: Do Higher Taxes Repel or Attract Investment?

Calgary Herald by Peter O’Neil.  Bank of Canada Governor Mark Carney called Friday for a beefed-up trade diversification strategy that should include major pipeline investments linking Canadian oil and gas to booming Asia-Pacific markets.

This morning’s Anchorage Daily News Op-Ed writer, Representative Les Gara (NGP Photo-R), continues to argue that higher oil taxes do not adversely affect Alaska’s investment climate.  Below, writer Tom Brennan (NGP Photo), takes issue with that argument.   Question of the day: Do Higher Taxes Repel or Attract Investment?  What say you?  -dh

Anchorage Daily Planet, by Tom Brennan.  The Alaska production tax under ACES can run as high as 75 percent of net profit. The total government take, including royalties and federal taxes, can reach 93 percent of net. The actual Alaska taxes have not been running that high, but the problem is the state is losing the competition for investment to other oil patch states which limit their tax take to something allowing the companies a better return on their investment. … Employment is holding fairly high on the Slope and some investments are being made, but no more than the companies consider absolutely necessary. The fact is that late-stage production — which is the phase the legacy fields are in — is labor and cost-intensive. The producers get less oil at greater cost.  …  For those holding the jobs and the contracts, the situation is relatively good news, at least for the short term. But the long-term strength of Alaska’s economy requires a healthy business climate, especially on the North Slope, and right now the state doesn’t have one. If Alaska’s oil patch were a farm, you would say the state was eating its seed corn. …  Ken Thompson (NGP Photo-L), a former ARCO Alaska president and now an Anchorage-based entrepreneur, is a major player with Brooks Range Petroleum Corp. BRPC has one rig on contract and plans two wells this season. The company drilled the only exploration well in northern Alaska last winter.  … Jim Weeks (NGP Photo), a former vice president at ARCO here, is managing member of UltraStar Exploration, which plans one well. … Right now Alaska’s future is in the hands of legislators whose judgment seems seriously flawed. They could fix the problem by backing down on government greed, but so far they won’t.

Today, Mella McEwenMidland Reporter-Telegram reported in FuelFix: “The reason we’re here is the Alaska state tax structure,” stated Geoff Wheeler, director, subsidiary development for  Koniag Development Corporation.  Joined by Lynn Johnson (NGP Photo), president of Dowland-Bach, an oilfield control and safety system manufacturer that was acquired by the Koniag Family of Companies in 2008, the two men met with local business leaders to discuss investment and joint opportunities in the Permian Basin.  Johnson and Wheeler stressed they are not looking to relocate their operations from Alaska but are exploring “strategic alliances, acquisition targets, a better understanding of the oil business” in West Texas as Wheeler explained.