A look at the highs and lows of windfall profit taxes
Hot Air takes a close look at Alaska, which does hit oil companies with extreme taxes. On one side of the ledger is the big money the state has raked in, and the money has been shared with Alaskans, to the tune of $1,200 to each Alaskan
Now, for the very bad side of that ledger. Oil companies have stopped drilling on state lands, and new development? Forget about it.
BP Alaska, which runs Prudhoe Bay, said earlier this year that it had delayed the development in the western region of the North Slope as a result of the tax. ConocoPhillips cited the same reason for scrapping a $300 million refinery project.
“What the tax has done is take away all the upside,” said Doug Suttles, president of BP Alaska. The U.K.-based oil company paid more than $500 million in taxes to Alaska last quarter — far more than it earned in profits from Alaskan oil, according to Suttles.
Investment dollars are flowing instead to places that have a better return, like the massive deep-water projects offshore in the U.S. Gulf of Mexico, where ConocoPhillips said the government take equals less than 50 percent of the barrel.
In July, BP announced it would begin developing the Liberty oil field, a $1.5 billion project expected to yield 100 million barrels of oil, located on federal lands in Alaska. If the project had been located in state lands on the North Slope, “I don’t think we’d have been able to make that investment,” Suttles said.
Nope boys and girls, Marxism still fails badly. It was a bad idea for Jimmy Carter, a bad idea for Alaska, and yes, a bad idea for Barack Obama to pursue should he be elected. If oil companies are now looking outside Alaska because of over-taxation, then what will American oil companies do if such taxes go nationwide?
Tags: Taxes
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August 12, 2008 at 2:09 am
Unfortunately, like Ed Morrissey, you have blindly followed the Seattle Times story without looking any farther. Sarah Palin campaigned to restructure the state’s oil tax structure, which was a deal between oil industry executives and state officials who have something in common – they are in prison, convicted of corruption charges.
Sarah Palin is one of few Alaska politicians the oil companies don’t own and they would love to take her down. According to Alaskans quoted on other blogs, the oil industry is booming in Alaska. What do you expect oil executives to say – that they are happy Sarah Palin ended their sweetheart deal?
According to the Seattle Times story you and Ed Morrissey mindlessly parrott, Alaska made $10 billion in oil revenues last years. Several years ago, ExxonMobil CEO Lee Raymond received a $400 million retirement package from a board he appointed.
August 12, 2008 at 2:50 am
The point of this post was to examnine how windfall profit taxes work wasn’t it?
Fact is if you punish a business, they will find other places to make their money, ply their trade etc. It does not make any sense at all, to force a business to pay more in taxes than it makes in profits.
It was not about the governor, or anyone else,it was about yet another example of the failure of Marxism. Yes, Marxism has always failed, deal with it.
I suppose your opinion of a “sweetheart deal” is allowing a company to keep more than 25% of its profits?
August 12, 2008 at 3:10 am
Too many conservatives (and i have been one since AUH2O) blindly defend “big oil” regardless of whether it’s right or wrong.
I am old enough (and I imagine you are too) to remember when there was competition at retail in the oil industry with companies like Pure, Flying A, Texaco, Atlantic, Sinclair and more than a dozen companies that no longer exist. The capitalist system (as opposed to marxist) requires competition. At present, competition doesn’t exist in gas retailing.
I work in automotive marketing. The automotive industry is as competitive as it gets. Competition means different models, features, pricing, service at the retail level, dependablity. The list goes on. It relies of effectively communicating to consumers; something GM has totally failed to do.
I am sure the leaders of GM, Ford and Toyota would love to be in a position like the leaders of ExxonMobil, Shell and BP – knowing that they could pass any cost increases along to consumers with the full knowledge competition would match your price.
Unfortunately, corruption exists in the bueiness world (whether it’s capitalist or marxist). Nowhere are corruption been more rampant than in Alaska and oil companies have been heavily involved in it.
Take a look at Alaska’s constitution. It’s unique. Alaskans are not just citizens; they’re shareholders of the state. They may be the ultimate capitalists.
August 12, 2008 at 3:12 am
Sorry for the “typos.” It’s 11 PM where I am.
August 12, 2008 at 11:56 pm
Well, I do not defend “Big Oil” no matter what they do, nor do I pretend that things like corporate greed do not exist. Some Conservatives are guilty of that yes.
Certainly there is corruption, but I must stress again, the point of this post was to look at how windfall taxes affect oil companies and our economy, dependence on foreign oil, etc.
Windfall taxation is an idea that has its roots in Marxism. Oil companies are paying more in taxes already than they make in profits. Punishing them further, is never going to benefit us in the long run.
Maybe even worse, in my estimation, is the fact that once our government delves into such an endeavor, what industry is next?
What other legal companies might be targeted by a bloated over-reaching federal government?
By the way, I thank you for your thoughtful posts.