BP settles tax in Alaska

Source: Financial Times

BP has agreed to pay Alaska $379m (£191m) to settle a dispute over its corporate income tax liabilities for 2000-02, the US state's governor announced late on New Year's Eve.

Sarah Palin said BP, Europe's second largest oil company, had agreed on December 31 to pay the money. The funds would be deposited in the constitutional budget reserve, the state's main savings account.

The terms and conditions of the dispute and agreement must be kept confidential by law, she added. "I am very pleased with this settlement and appreciate BP's willingness to work with the state of Alaska and come to a fair resolution."

BP confirmed the details of the settlement and said it was glad the matter was resolved.

The payment, on behalf of the BP Exploration (Alaska) subsidiary, is the latest blow to BP which is still under investigation by state officials for last year's oil spill in Prudhoe Bay for which the company has already paid $20m in fines.

Just before Christmas, Ms Palin signed into law a proposed tax increase on the oil industry, boosting the rate from 22.5 per cent to 25 per cent of the net value of oil.

The increase, which is expected to raise the industry's tax bill by $1.5bn next year, led BP to say it was reviewing its investment plans in Alaska.

Doug Suttles, president of BP Exploration (Alaska), said he was disappointed by the tax hike. "This will impact our business plans in 2008."

On December 26, an Alaska superior court judge ruled that BP, ExxonMobil and other oil companies could have their leases for Point Thomson, a gas and condensate field, revoked by the state because they had taken too long to develop it.

The ruling was welcomed by Ms Palin.