Here we go again

The usual suspects are at it again, trying to persuade Alaskans to cut off their noses to spite their faces.

A group is moving to get a measure before Alaskan voters asking them to increase taxes on the oil industry by somewhere between $1 billion and $2 billion a year. This time around they are calling it “Vote Yes for Alaska’s Fair Share.” A group tried the same thing in 2014, but Alaskans were too smart to fall for it

The 2014 effort, masquerading as reform to stop an illusory “giveaway” to the industry, was an attempt to repeal Senate Bill 21, which thankfully had replaced former Gov. Sarah Palin’s disastrous “Alaska’s Clear and Equitable Share” oil production tax. ACES, as it became known, was lousy law. It contained a 25 percent base rate and progressivity contributing to a marginal tax rate of more than 90 percent at higher oil prices.

Who would want to invest in that environment? ACES squeezed industry far beyond what was necessary to pay for burgeoning government and fat capital budgets. Predictably, investment dollars for new oil production went elsewhere and Alaska became the only oil province in the country to lag in production as others boomed. Throughput in the trans-Alaska oil pipeline dried up at 6 percent to 8 percent a year.

Nowadays, the good news is that industry has opened new fields on the North Slope that promise more production – along with more jobs and increased revenues for the state.

The newly offered “Fair Share Act,” with lots of former Gov. Bill Walker’s henchmen and Democrats rowing the boat, would derail all that. It would alter the state’s 2014 oil-production tax for larger North Slope fields, but would not affect smaller fields.

The effect? The same as Palin’s ACES. Investment by larger companies would dry up and go elsewhere and the state would lose production and revenues. Alaska again would become an industry backwater.

It is too bad that some are trying to use the state’s current fiscal woes to punish the oil industry just as the state seems to be clawing its way out of a recession. It is even worse that we all will pay if they are successful.

2 Responses to Here we go again

  1. R-Dubya August 20, 2019 at 11:58 am

    FACTS & ECONOMIC IMPACT (source: AK RDC)
    • Alaska’s oil and gas industry has produced more than 17 billion barrels of oil and six billion cubic feet of natural gas, accounting for an average of 20 percent of the entire nation’s domestic production (1980 – 2000).
    • The oil industry continues to be the largest source of unrestricted revenue to the state. Oil production generated $2.4 billion in revenue for the State in FY 2018, approximately 80 percent of unrestricted General Fund revenues.
    • Based on current oil price forecasts and an oil production methodology forecast, the state expects the industry to generate total Unrestricted General Fund revenue of $2.13 billion in FY 2019 and $1.75 billion for FY 2020 based on an oil price forecast of $68.90 per barrel for FY 2019 and $66 per barrel in FY 2020. The forecast anticipates the industry will account for 80 percent Unrestricted General Fund revenue in FY 2019 and 76 percent in 2021. (Alaska Department of Revenue, 03/2019)
    • Total revenue generated by the oil industry in FY 2019, including unrestricted and restricted revenue, is expected to be $2.639 billion. (Alaska Department of Revenue 03/2019)
    • In 2018, the annual average wage earnings for the industry were more than 2.5 times higher than the statewide average.
    • For each job in Alaska’s oil industry, there are 20 additional jobs in the Alaska economy connected to the industry. No other industry in Alaska comes close to the multiplier effect of the oil and gas industry. (McDowell Group 2014 Economic Report)
    • The oil industry accounts for one-third of Alaska jobs and about one-half of the overall economy when the spending of state revenues from oil production is considered. In other words, without oil, Alaska’s economy would be half its size. (ISER, UAA study 2/2011)
    • The Alaska OCS may be one of the largest untapped oil and gas basins in the world. An annual average of 54,700 new jobs would be created and sustained through the year 2057 by its development, with 68,600 during production and 91,500 at peak employment. (University of Alaska Institute of Social and Economic Research, 2011)
    • Development of Alaska’s OCS resources would result in a total of $145 billion in new payroll through the year 2057, including $63 billion to employees in Alaska and $82 billion to employees in the Lower 48. (University of Alaska Institute of Social and Economic Research)
    • Oil production in the Arctic OCS would generate $193 billion in government revenue through 2057, with $167 billion to the federal government, $15 billion to the State of Alaska, $4 billion to local Alaska governments, and $6.5 billion to other state governments. (University of Alaska Institute of Social and Economic Research)
    • The Alaska Permanent Fund, worth approximately $63 billion in February 2019, was created in 1976 to set aside a portion of oil revenues for future generations. The fund has paid out more than $20 billion in dividends to Alaskans. (Alaska Permanent Fund Corporation)
    • The oil and gas industry has invested over $55 billion in North Slope and Cook Inlet infrastructure since the 1950s. (Alaska Oil and Gas Association)
    • In 1974, the building of TAPS began, the largest construction project in the world. The original estimated cost was $900 million, but when it was completed in 1977, final costs were over $8 billion.
    • The potential Alaska Natural Gas Pipeline Project from the North Slope to tidewater in Southcentral Alaska is estimated to cost $45 billion.
    • Prudhoe Bay remains the largest conventional oil field in North America. Four of the nation’s top ten conventional producing oil fields are located on the North Slope. Alaska ranks fifth behind Texas, North Dakota, New Mexico and California in daily oil production.
    • There are more than a dozen producing fields on the North Slope. Cumulative oil production from these fields is over 17 billion barrels. Ultimate production from Prudhoe Bay itself is expected to exceed 14 billion barrels. (Alaska Department of Revenue)
    • Oil production in Alaska has dropped approximately 75 percent since hitting a peak of more than two million barrels per day in 1988.
    • North Slope production averaged 518,400 barrels per day in 2018, up from 508,446 barrels per day in 2015, but a decline of 1.5% from 2017.
    • North Slope production is expected to average 511,500 barrels per day in FY 2019 and 529,000 barrels per day in FY 2020.
    • The State currently estimates Prudhoe Bay contains an additional 2.5 billion barrels of recoverable oil plus another 426 million in reserves from satellite development. New investments and improved technologies may increase future reserve estimates. (Alaska Department of Revenue)
    • Improvements in drilling technology have not only reduced the surface footprint, they have greatly expanded the subsurface drillable area. Modern drill sites can now be limited to six acres, with a subsurface drillable area of 32,170 acres, or 8 miles out from the pad. (ConocoPhillips Alaska, Inc.)
    • There are 28 producing oil and gas fields on the Kenai Peninsula and offshore Cook Inlet. This area has produced a cumulative total of over 1.3 billion barrels of oil and 7.75 trillion cubic feet of natural gas. The largest oil field, the McArthur River field, is expected to recover 639,000 barrels of oil. The largest gas field, the Kenai field, is ultimately projected to produce 2.427 trillion cubic feet of natural gas. Cook Inlet oil production peaked at 230,000 barrels per day in 1970 and fell to 8,900 bpd in FY 2010, before rebounding to over 15,000 bpd in 2016. (Alaska Department of Revenue)
    • Alaska has two refineries that produce gasoline, diesel, and jet fuel for Alaska markets. Refineries are located in Nikiski and Valdez.

    Given the facts above (by the AK Resource Development Council), these greedy and selfish morons want to put into jeopardy a great relationship with the O&G Industry and possibly dis-incentivize potential investment?

    If you think the unemployment rate in AK is high now (about twice that of the Lower-48), and the migration – exodus of population is unacceptable, go ahead and enact this ‘crazy’ legislation. AND Then, get ready for the impending results!!!

    Reply
  2. R-Dubya August 20, 2019 at 6:32 pm

    The list of ‘Perpa-Traitors’ collaborating within their snake-pit pushing this irresponsible initiative, are the same folks classified as a “Clear & Present Danger” to the economic well being of Alaska and Alaskans …

    – Robin Brena
    – Sen. Bill Wielechowski
    – Merrick Peirce
    – Jane Angvik
    – Vic Fischer
    – Joe Paskvan
    – Ken Alper
    – Kay Brown
    – Harry Crawford

    North Slope crude production will ‘flat-line’ and will remain at this level for the foreseeable future, as forcasted by the SOA Division of Revenue – Tax Division.

    If this initiative somehow gains traction and becomes law, there’s a high percentage that people will loose there jobs and small businesses will experience a decline in general commerce.

    If this affects you in a negative way, you can thank those listed above for the shortsightedness and selfishness.

    Reply

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