Nov. 16 (Bloomberg) -- Alaska is poised to raise taxes for oil producers such as BP Plc and ConocoPhillips for the second time in two years after the state's Senate voted to approve an increase proposed by Governor Sarah Palin.

``This is a compromise bill but it is a fair bill, and it will go a long way for us to get our fair share'' of tax revenue, state Senator Bill Wielechowski said during the vote late Thursday.

The Senate voted 14 to 5 in favor of boosting the tax on oil companies' net profits to 25 percent from 22.5 percent. Palin has said the current tax doesn't raise enough government revenue and was tainted by corruption, when the legislature passed it last year.

Alaska's House of Representatives voted in favor of the tax increase on Nov. 11. The House is scheduled to meet 9 a.m. Friday Alaska time to vote on the Senate version of the bill, which includes some new amendments.

``It should pass tomorrow unless somebody starts playing games and undermining the provisions of the bill,'' said State Representative Les Gara. Palin, a Republican, in September proposed raising the tax. The legislature began convening in Juneau on Oct. 18 for a 30-day special session. The session ends at midnight, leaving lawmakers little time to finalize or reject the bill. Palin said she might call a second special session should the legislature adjourn without passing a tax bill.

Alberta's Royalties

Oil reached a record $98.62 a barrel on Nov. 7 on the New York Mercantile Exchange and has gained about 50 percent this year. The Canadian province of Alberta last month said it will raise oil and natural-gas royalties.

Alaska, home to the biggest oil field in the U.S., depends on oil taxes, fees and royalties for almost 90 percent of its budget. Exxon Mobil Corp., BP and ConocoPhillips are the largest taxpayers, pumping the bulk of the more than 700,000 barrels Alaska produces every day from fields on the North Slope.

Oil companies are opposed to overhauling the tax and some have run advertisements in local newspapers saying an increase could lead to less investment.

Under the current tax regime, Alaska will collect an estimated $4.5 billion this year, the government estimates. The Senate bill, which includes a surcharge of 0.4 percentage point per $1 in profit when oil prices exceed $52 a barrel, would generate hundreds of millions in additional revenue when oil prices are above $80 a barrel, according to the Alaska Department of Revenue.

Senate Amendments

The Senate passed a slew of amendments to the bill, including one that limits tax deductions on unscheduled maintenance and shutdown of oil production. The amendment was in part spawned by corrosion problems that caused an oil spill last year at Alaska's Prudhoe Bay oil field, which prompted operator BP to temporarily shut down production. On Oct. 26, BP pleaded guilty to a federal misdemeanor for the spill and agreed to pay $20 million in criminal fines and other penalties.

Former Governor Frank Murkowski last year signed legislation for a 22.5 percent net-profits tax after a debate in which companies such as Anchorage-based oil-services firm Veco Corp., BP and Exxon Mobil called for a 20 percent rate and some legislators supported 30 percent.

In May, former Veco Chairman Bill Allen and Rick Smith, a former vice president, pleaded guilty in federal court to bribing three former state lawmakers during last year's vote. The executives told federal agents they wanted to keep taxes low on industry.

Former state lawmakers Vic Kohring and Pete Kott were convicted earlier this fall in an Anchorage federal court on bribery and conspiracy charges. Former Rep. Bruce Weyhrauch is awaiting trial on similar charges and has pleaded not guilty.

To contact the reporter on this story: Tony Hopfinger in Anchorage, Alaska, at thopfinger@gci.net

Last Updated: November 16, 2007 05:04 EST