The Alaska Oil Comeback
Alaska’s oil comeback has begun.
It’s been just over a month since the Legislature passed Senate Bill 21, the More Alaska Production Act. We’re already seeing the positive effects of our new tax regime.
Look at how the companies have responded: The Kuparuk field operator is moving a new drill rig to that field and is working to fund a new drill site. ConocoPhillips’ vice president for exploration and production said this about Alaska, “I would like to see us adjust the capital program so that we can completely arrest the decline in production in Alaska or even turn it around.”
Rather than simply trying to stem the decline, with SB 21 passed, companies are now setting their sights on reversing Alaska’s production decline and increasing oil production in Alaska.
Brooks Range Petroleum, a smaller Alaska-based company, has said publicly that the More Alaska Production Act improves its ability to develop the Mustang field.
And Repsol, a newer entrant to Alaska, recently said this about several new discoveries on the North Slope, “Recent tax reform passed in Alaska was a critical factor in ensuring the development of this project.”
These announcements of new investment and a greater commitment to Alaska are encouraging signs for our state’s future. This fall, as companies make investment plans for next year, Alaskans can expect more investment news to follow.
To get a sense of the level of investment Alaskans can expect under our new oil tax regime, I recently traveled to Scotland to meet with government officials and key oil and gas companies. After lowering its government take on North Sea oil, the United Kingdom saw a resurgence in its oil and gas sector. Tax reform in the UK led to new jobs, new investment and new production.
Here in Alaska, with the signing of the More Alaska Production Act into law, Alaskans now have a tax structure that can compete with others. The new structure is fair, encourages new production, is simple and balanced and is competitive for the long-term.
Our new tax system centers on the idea that not only our generation, but future generations of Alaskans ought to benefit from Alaska’s massive resource basin on the North Slope. We worked to ensure Alaska’s treasury is not exposed at low oil prices to making tax credit payments without the revenue to cover them. And, we made the state more competitive when oil prices are high.
Alaskans now have an oil tax system built around a 35 percent base rate and a per-barrel tax credit tied directly to actual oil production. It’s simple: Companies are treated fairly, and in order to get tax relief from the state, companies must put more oil into the pipeline.
While reforming Alaska’s oil taxes was vital to increasing North Slope production and filling the pipeline, we also worked to streamline and increase efficiency within the state’s permitting processes.
We introduced, and the Legislature passed, House Bill 129, which streamlines the state’s oil and gas permitting process to provide greater certainty to the public, oil and gas operators, and industry. It authorizes the Department of Natural Resources to evaluate oil and gas exploration projects in geographical areas, and allows project approvals to be consolidated into one comprehensive decision.
I want to especially thank those who made the Alaska Oil Comeback a reality, starting with the leadership in the Alaska Legislature, and all lawmakers who were dedicated to a rigorous public process. They set the tone early for one of the most productive sessions in decades. I applaud them for their focus on the facts and growing Alaska’s economy for the long term.
Hundreds of Alaskans, including small business owners and employees, teachers, and retirees made their voices heard by testifying in Juneau and contacting their legislators.
With the More Alaska Production Act, the foundation is set for the Alaska Oil Comeback. Alaska is on track for greater oil production, and the new jobs, new opportunities and new investments that follow.