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Conoco scraps project on Alaska oil tax hike-report
November 27, 2007 / 2:15 PM / in 10 years

Conoco scraps project on Alaska oil tax hike-report

NEW YORK, Nov 27 (Reuters) - ConocoPhillips Inc (COP.N) has canceled a planned $300 million clean fuels project on the Alaska North Slope after changes to state tax legislation denied it deductions for the investment, the Anchorage Daily News reported Tuesday.

Conoco, the largest oil producer in Alaska, had threatened to cancel the upgrade of its topping plant at its Kuparuk oil field earlier this month when state legislators were debating an increase in taxes on oil production.

Other oil producers, including BP Plc (BP.L) and ExxonMobil Corp (XOM.N), have said they will review all of their planned investments in Alaska in the wake of the tax increase and have warned that higher taxes could lead to less investment and more rapid declines in Alaskan oil production.

Alaska lawmakers passed the bill on Nov. 16 that raises tax rates on oil produced in the state and limits the deductions big producers like Conoco and BP can take for operating costs at large fields including Kuparuk and Prudhoe Bay.

Conoco and BP currently extract diesel fuel for their North Slope operations from produced crude oil at Kuparuk and Prudhoe Bay using simple, miniature refineries called topping plants.

From 2010, the companies are required to use ultra-low sulfur diesel (ULSD) fuel to comply with federal environmental legislation and modifications would be required to the topping plants to reduce the sulphur content of the diesel they produce.

Conoco now plans to truck ULSD to the North Slope, the Daily News said. Alaska’s only producer of ULSD is the Tesoro Energy Corp TSO.N refinery in Nikiski, south of Anchorage, approximately 1,100 miles from the North Slope oil fields. (Reporting by Robert Campbell; Editing by John Picinich)

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