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Thursday, March 24, 2011

How To Bargain With An Oil Company For Its Tax Break

If Conoco-Phillips wants a 40% reduction in oil taxes in Alaska, here is what I would ask for in return: Move CP's R & D unit to Alaska and finance it with part of the tax roll back. Alaskans have this crazy notion that if only the oil companies invest in field exploration and development that the next 30 years will be jut like the last 30. Well--that ain't gonna happen. Why? Because it is not in the interest of the growth in their stockholder's return on equity that they go back to the future--they are going forward to the future and they are going to finance part of that acceleration with our Tax dollars. These Corporations aren't going to stand still; they are dynamic and they are going to change and Alaska should be positioned to change as well--right alongside them. So, here is my modest proposal--if CP wants a 40% reduction in its tax burden in Alaska, we will propose that they bring their Research and Development subsidiary up here and capitalize advancements in emerging technologies right here in Alaska. The profile of their Research and Development unit can be found on page 22 of their current 10-K Report. As part of their investment in research, CP is currently making significant investments in University Research in Colorado and Texas. In Financial Note 23, Pp 130 of the 10-K report, R&D expenses were roughly $230 M in 2010. At that level of funding, and assuming a $750 M annual tax benefit for Conoco Phillips from lowering their taxes, those investments from our tax breaks could anchor a significant R&D backbone within our University System, fund quality support jobs and still leave enough money for significant investment in Alaskan fields.
Technology Development
Our Technology group focuses on developing new business opportunities designed to provide future growth prospects for ConocoPhillips. Focus areas include advanced hydrocarbon processes, energy efficiency technologies, new petroleum-based products, renewable fuels and carbon capture and conversion technologies. We are progressing the technology development of second-generation biofuels with Iowa State University, the Colorado Center for Biorefining and Biofuels and Archer Daniels Midland. We have also established a relationship with the University of Texas Energy Institute to collaborate on emerging technologies. Internally, we are continuing to evaluate wind, solar and geothermal investment opportunities.
In early 2011, we announced we will partner with General Electric Capital and NRG Energy, Inc., to form a new joint venture, Energy Technology Ventures (ETV), which will focus on development of next generation energy technology. ETV will invest in, and offer commercial collaboration opportunities to, venture- and growth-stage energy technology companies in the renewable power generation, smart grid, energy efficiency, oil, natural gas, coal and nuclear energy, emission controls and biofuels sectors.
In addition, we are equal co-venturers with General Electric Company in a Global Water Sustainability Center in Qatar, which researches and develops water solutions for the petroleum, petrochemical, municipal and agricultural sectors.
We offer a gasification technology (E-Gas™) that uses petroleum coke, coal, and other low-value hydrocarbons as feedstock, resulting in high-value synthesis gas used for a slate of products, including power, substitute natural gas (SNG), hydrogen and chemicals. This clean, efficient technology facilitates carbon capture and storage, as well as minimizes criteria pollutant emissions and reduces water consumption. E-Gas™ Technology has been utilized in commercial applications since 1987 and is currently licensed to several third parties. We have also licensed E-Gas™ to third parties in Asia and North America, and are pursuing several additional licensing opportunities.

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