Fresh ideas needed to boost oil production, consultant says

Pedro van Meurs, an industry analyst, told a joint hearing of the Senate Resources and Finance committees that Parnell's tax-cut bill "does not even come close" to going far enough to hit the Republican governor's goal of 1 million barrels a day.

Reaching Parnell's goal would call for new drilling in federal areas such as the Arctic and the Arctic National Wildlife Refuge. The Arctic isn't yet online and the protected wildlife area is off limits. But Van Meurs told senators he believes the goal can be reached with state resources alone, if changes are made.

About 600,000 barrels currently flow through the pipeline. Parnell wants to reach his target within a decade.

Increased production considered vital to Alaska's financial future. About 90 percent of the state's unrestricted revenue comes from oil taxes. State services depend on the funds.

Van Meurs, a consultant to the Legislature, said the changes he's proposing -- which he plans to lay out over two days of hearings -- would lead to $7.5 billion in additional investment. Part of his plan calls for the state to define competitive fiscal terms for its oil and gas resources and offer fiscal stability for large new projects.

He said it would be difficult to introduce the changes he's proposing in what he called a somewhat unfavorable political climate in Alaska.

He cited the deal-by-deal approach the state has taken for major projects, which he said is common for places with smaller populations, and a dependency on the three major oil companies for much of the state's unrestricted revenues.

Those companies are in "harvest mode," he said, meaning that they draw cash out of Alaska for investment elsewhere. He said they've operated this way for a long time, and that he cannot see much for them to invest in in Alaska -- in spite of vast remaining reserves on the North Slope -- if fiscal terms aren't changed.

Oil and gas companies have said Alaska's current tax structure eats too deeply into their profits and discourages new investments.

A version of Parnell's oil and gas industry tax cut bill cleared a divided House last year before stalling in the Senate. Critics called it a corporate giveaway, with no guarantees the state would get anything in return.

Supporters, including the oil industry, said it was necessary to boost investment and reverse the trend of declining production.

Senate leaders said they needed more information to make a sound policy call and plan to write their own tax bill this session.