Arco Pays IRS $800 Million in Tax Dispute : Energy: The settlement resolves a dispute over Alaskan oil pumped as early as 1980.

Atlantic Richfield Co. said Friday that it paid about $800 million to the Internal Revenue Service to settle a tax dispute over windfall profit from Alaskan North Slope crude oil.

The Los Angeles-based energy company said it had already set aside enough money to cover the settlement and, as a result, profit would not be affected. Arco faced up to $1.8 billion in back taxes and interest, said company spokesman Albert Greenstein.

Arco on Friday afternoon handed over several checks amounting to about $800 million to IRS officials in Dallas, Greenstein said. He would not say how much Arco had set aside for the settlement.

“I don’t think it’s going to have any material affect on Arco’s finances,” said energy industry analyst Craig Schwerdt at the brokerage firm Seidler Amdec. “They were pretty sure they would have to settle at some price.”

Arco’s dispute with the IRS stemmed from windfall-profit taxes on the company’s Alaska North Slope crude pumped between 1980 and 1985. The government claimed Arco undervalued the oil, thus reducing its tax liability. The IRS said Arco owed $800 million in windfall taxes plus interest, and began efforts to collect in 1988.

The windfall profit tax was enacted in 1980 to prevent companies from collecting huge, sudden profits after oil prices were deregulated. But after skyrocketing initially, prices collapsed in late 1985 and no taxes were collected after that. The tax itself was repealed in 1988.

Arco, the second-biggest producer of North Slope crude, said its payment covered the back taxes and interest.

This is not the first run-in ARCO has had over taxes on Alaskan crude. In 1986, Arco agreed to pay Alaska $243 million as part of a tax settlement covering the company’s production on the North Slope and Cook Inlet fields. Still unresolved is a dispute with Alaska over royalties paid on the same production. Alaska is demanding $320 million in that case, the company said.

In 1988, Arco paid Alaska $172.3 million to settle a dispute stemming from oil exploration and production activities between 1987 and 1981. Also that year, Arco agreed to pay $315 million in restitution and fines to settle allegations it violated federal oil price controls in the 1970s and early 1980s.