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Tax Increase May Affect BP's Alaskan Investment Plans

by Jason Gorringe, Tax-News.com, London

27 December 2007


Oil companies have this month been struck by a USD1.5 billion tax increase by the Alaskan authorities, which may force BP to reduce its funding for future developments in the state.

Alaskan Governor, Sarah Palin recently gave the go-ahead to reforms increasing the production tax on the net profits of oil companies from 22.5% to 25%, according to reports.

Steve Rinehart, a spokesman for BP in Alaska commented in the UK's Times newspaper that: "The effect...is likely to be reduced investment."

BP's budget for 2008 is still under review, causing Rep. Mike Chenault (R-Nikiski) to observe in a report by regional news service KTUU.com:

"Changes were made. Hopefully we didn't swing the pendulum too far the other way to dis-incentivize investment in Alaska, and cost Alaskans jobs."

The drop in funding will make a significant difference to the state, which last year reaped the benefits of having USD2 billion invested there by BP.

Meanwhile, energy company ConocoPhillips recently announced that it had decided not to go ahead with proposals to invest at least $US1bn in Alaska.

However, in spite of this, Ms. Palin has reportedly defended her decision, stating that the tax increase is fair.


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