Headlamp – Alaska take note: lower taxes lead to increased investment – $50 billion.

Alaska take note: lower taxes lead to increased investment – $50 billion. Exxon Mobil Corp. plans to spend $50 billion in the United States over the next five years, an investment enabled by the recent sweeping changes to U.S. corporate tax law, the company said Monday. Exxon said it will pour billions of dollars into the Permian Basin, a prolific oil field in West Texas and New Mexico, and it plans to build new manufacturing sites, improve its infrastructure and expand existing operations. “This will create thousands of jobs, strengthen the U.S. economy and enhance energy security,” Exxon CEO Darren Woods said in a blog post on the company’s website. Exxon’s investment comes after similar announcements by Apple and JPMorgan Chase & Co., which said they would invest billions in the United States after the U.S. corporate tax rate was lowered from 35 percent to 21 percent. It also comes on the heels of Exxon’s own plan to invest $20 billion over the next decade in projects along the Gulf Coast. Wood said the company is “actively evaluating” how the lower corporate tax rate will impact “the economics of several other projects currently in the planning stages to further expand our facilities along the Gulf Coast.”

Higher oil prices won’t save Alaska. It’s the year of the budget at the Alaska legislature. And while lawmakers debate new taxes and drawing from the Permanent Fund, oil prices marched steadily upward in January. Two days ago, the price of Alaska’s oil jumped up above $70 dollars per barrel for the first time in three years. And, that’s big news in Juneau. Some senate Republicans point to those rising oil prices as an argument to bolster their reluctance to vote for an income tax. It’s big news for Alaska too. Because that’s right about the price point when the state starts making nearly $70 million dollars for every dollar the price increases. But that doesn’t go far when you’re facing a budget deficit in the billions. Sure, the gap between what the state spends and what it makes starts closing faster. And that price is much higher than the $56 per barrel the state projected for the next year. State Tax Division Director Ken Alper said if prices stay in that range through next June, the state expects to bring in about $200 million more than previously thought. “That will cover a little less than one-tenth of the deficit which is estimated at about $2.5 billion,” Alper said.

If you discourage something, you get less of it. Oil company officials urged Alaska lawmakers on Monday to reject a $225 million production tax increase proposed in the House, saying it will damage the economy and reduce industry investment at a promising time. “The bill will stall the growing momentum in the industry that has and continues to drive Alaska’s economy,” said Cory Quarles, Alaska production manager for ExxonMobil, speaking to the House Resources Committee. “This is the wrong time to disincentivize development,” said Scott Jepsen, head of external affairs and transportation for ConocoPhillips Alaska. Several major projects are in the works, including by ConocoPhillips, Jepsen said. But a significant tax increase could threaten some, such as the Willow prospect, by boosting costs, he said. The company has yet to make a final decision to develop that field, which could produce 100,000 barrels daily. “We don’t have to pursue that,” he said. Reps. Andy Josephson and Geran Tarr, Anchorage Democrats and Resources co-chairs, and Paul Seaton, R-Homer, introduced the bill to boost the minimum production tax to 7 percent, from 4 percent.

Got gas? Call Agrium. Agrium could see the re-opening of its North Kenai fertilizer facility, the company’s new Alaska manager made the announcement on January 23. The Agrium facility employed 400 Alaska residents when it was in full operation before it closed in 2007. The new Alaska Manager is Fred Werth. The facility closed its doors when the Cook Inlet gas fields saw a major decline and the facility was unable to secure enough supply in order to keep operating. But the outlook has brightened. More gas is flowing in the aging oil-and-gas basin, and explorers have announced new discoveries. On September 12, 2016, Agrium announced that it had agreed to merge with PotashCorp, which will make the combined company, Nutrien, the largest producer of potash and second-largest producer of nitrogen fertilizer worldwide. Agrium is proposing a schedule in which it takes a year to inspect and assess the site, “Assuming plant rehabilitation is economical, and assuming an adequate supply of natural gas can be secured” the company will implement a 26-month plant renovation phase.

First Reads:

Exxon, citing tax, regulatory relief, to spend $50b in U.S.
Chron, Collin Eaton, January 29, 2018

Higher oil prices help, but don’t solve the state’s budget problem
Alaska Public Media, Rashah McChesney, January 29, 2018

Oil industry officials slam proposed hike in production tax
Anchorage Daily News, Alex DeMarban, January 30, 2018

Agrium Working To Re-Open North Kenai Fertilizer Facility
KSRM Radio Group, Jennifer Williams, January 29, 2018