My reason for pursuing meaningful oil tax reform has been consistent: To turn around declining production and create Alaskan opportunity.
This requires investment, the kind that other oil-producing regions in the Western hemisphere attract during a high-priced environment. Alaska’s North Slope lacks this investment.
We have a world-class hydrocarbon basin: the North Slope. Yet unlike these other oil-rich areas — places such as North Dakota, Alberta, Texas — our production decline continues. Tax reform is about maximizing our resources for the benefit of all Alaskans. It’s about moving the needle on production because Alaska’s oil production decline is real. Last year’s daily North Slope production average for February was 634,000 barrels; this year’s average for February fell to 610,000.
According to the U.S. Department of Energy, Alaska’s production is down 22 percent in the last four years.
Conversely, Lower 48 crude oil production has spiked 17 percent during that same period, but Alaska’s declining production helps drag the nation’s overall sum down six percentage points.
Alaska encourages exploration investment with tax credits, while simultaneously discouraging production and legacy field investment with a production surcharge as oil prices climb. That needs to change.
Tax policy affects business decisions — and Alaska’s oil tax at high prices is too high. We are pricing ourselves out of business. Alaska needs to get back into the game, and grow the economic pie for our people.
That’s what I’m doing, and that’s what I’ve done with HB 110, which passed the House last year and never received serious public consideration from the Senate. I’ve put forth the only proposal that’s generated a response from North Slope operating partners willing to invest at least an additional $5 billion.
It’s also the only plan for which these North Slope leaseholders identified projects for development, including one with about 80 million barrels additional reserves. BP Alaska’s chief financial officer Claire Fitzpatrick last November told an Anchorage crowd, “BP and our partners are poised to invest billions of dollars in new projects that will result in billions of barrels of new oil from known sources that will sustain throughput in the pipe and generate billions of dollars for the state, but we are poised for that when Alaska has got a more competitive business climate.”
HB 110 moves toward my 1 million barrels per day of production goal. This achievable target is part of a greater vision to keep Alaska strong and make us a leader in securing energy for America. Why not produce more American energy for Americans? I find it unacceptable that Americans face such dramatic fuel price hikes underscored by unstable foreign governments providing our nation’s energy needs when Alaska has so much to offer our nation. Reaching 1 million barrels requires more than significant state tax change. It also calls for federal agencies to focus on growing America’s economy by tapping Alaska’s energy storehouses.
But reaching that 1 million barrel target starts with creating a business climate that changes investment behavior.
The Senate’s tax proposal, SB 192, the Senate Resources Committee’s thin response to HB 110, fails to do that. SB 192 requires no new investment, fails to produce new commitments, and no meaningful new production would come from this bill.
It’s a minor tax reduction that has the oil producers saying no thank you. SB 192 is a timid reduction that will not jump start projects identified by the companies. Alaskans see status quo decline as unsustainable and unacceptable. Long-term Alaskan opportunity and prosperity require more oil in the pipeline. Game-changing tax reform will do that. Small attempts won’t.