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Alaska’s economic engine is running out of oil

Alaska needs more oil production …
… to pay our bills,
…. sustain a healthy economy
… keep Alaskans safe, healthy and educated
… and make sure our children have a bright future.


Oil pays for 90 percent of state government…
… which allows us to enjoy a wide range of state services
… without paying state income or sales tax
… or dipping into the Permanent Fund.


Oil grows the Permanent Fund…
… It added $887 million last fiscal year
… and has contributed $12.8 billion since its inception.


One out of every 3 Alaska jobs is tied to oil & gas …
… and while Alaska’s overall employment level has been steady and North Slope oil & gas employment has been strong, a disproportionate number of North Slope jobs are for oil field maintenance, repair & operations and add no new oil to the pipeline
… in fact, only one in 6 BP employees on the North Slope is involved in finding more oil or building projects
… and with many contractors involved in drilling & construction now focusing their business activities and hiring on growth areas like North Dakota, there’s growing concern about the loss of these skills in Alaska and implications for future growth here.


But oil production is rapidly declining …
… The trans-Alaska pipeline is almost three-fourths empty and now carries 25% as much oil as it did at its peak.
… Since 2007 – when the legislature imposed ACES retroactively – North Slope production has declined 21%
… and continues to decline an average of 6% per year.


Between revenue losses from declining oil production and state spending increases, Alaska is on the brink of state budget deficits …
… The oil price required for the state budget to break even increased 22% in a single year
… from $85/barrel in FY 2012 to $104/barrel in FY 2013, according to the state’s Office of Management & Budget.
… Oil prices have dipped below $95/barrel in recent months, but rebounded to about $110/barrel.
… Where will the money come from to make up the difference as oil revenues continue to decline? New individual taxes and fees? The Permanent Fund? Cuts to state services?


In fact, according to the Legislative Finance Division, Alaska will lose $900 million next year due to falling oil production…
… That’s more than the entire state spends on schools, roads, harbors and airports each year
… almost double the entire Municipality of Anchorage operating budget
… more than six times more than this year’s Fairbanks North Star Borough’s budget
… and 2.5 times more than the entire budget for the University of Alaska.


Alaska is missing out on the nation’s oil boom because our tax structure is too high
... In 2010, Wood Mackenzie, a leading world energy industry research firm, ranked Alaska 129 among 141 oil & gas regions worldwide in terms of fiscal competitiveness & near the bottom of U.S. states, along with California
… which is one of the main reasons why production has increased 18% in the Gulf of Mexico, 20% in Texas and a whopping 192% in North Dakota over the last 5 years while continuing its free fall in Alaska.
… Since ACES, ConocoPhillips’ capital spending in the Lower 48 has tripled; in Alaska, it’s been flat.
… BP’s 2012 capital spending in Alaska is roughly half what it was projected to be before ACES
… and two-thirds of its spending isn’t adding new oil to the pipeline


The solution is simple: Lower taxes = more production…
… There are 4.2 billion barrels of recoverable oil left in the legacy fields (Prudhoe Bay, Kuparuk) but little incentive to produce them because ACES eliminates the upside potential of investments
… But the major North Slope oil producers have committed to invest more than $5 billion in new projects to put more oil into the pipeline NOW if there’s meaningful oil tax reform.
… While tax incentives have spurred exploration on the North Slope, it can take a decade or more to bring a new oil field on-line
… and even the new independent companies leading the charge in exploration have testified the current tax structure is a serious impediment to attracting investment capital and developing any potential finds.


Oil tax reform = more long-term jobs, business opportunities and state services for ALL ALASKANS to enjoy, and a sustainable economy for generations to come …

Vote for more oil … more jobs … a stronger economy. Vote for oil tax reform!

Economist lays out ‘maximum sustainable yield’ plan to make the most of an estimated $160 billion in savings and future production

For Petroleum News | Week of August 26, 2012

By Wesley Loy

The gusher of annual oil revenue the state has enjoyed since production began at Prudhoe Bay in 1977 has transformed the Alaska economy and eliminated the need for personal income and general sales taxes that residents in other states must pay.

But from the beginning, this great wealth has burdened thoughtful Alaskans with a nagging question: How can we make the money last?

Read the full article here >

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Did you know?

It’s virtually impossible to replace the role oil plays in Alaska’s economy even if you combined a state income tax with a gas pipeline, loss of the PDF and development of offshore oil reserves.

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