Policy matters. After almost two decades of decline, Alaska has enjoyed two years of increased North Slope oil production with another increase expected this year. This increased production came from multiple fields and means hundreds of millions of dollars in additional state revenue.
Why were companies willing to invest in Alaska during a time when oil prices were at historic lows? Simple answer. State policy positioned Alaska to be more competitive, leading to amazing results. No longer are we preparing for the potential of running out of natural gas in Cook Inlet. New and legacy fields on the North Slope and Cook Inlet are providing millions of barrels of new oil. And recent discoveries have been made that could increase Alaska's current production by hundreds of thousands of barrels if all were brought online.
Policy matters at the federal level, too. From the Secretarial Order authorizing a new National Petroleum Reserve-Alaska management plan, the reopening of the coastal plain of the Arctic National Wildlife Refuge, and the new draft proposal for offshore leasing, all signal a federal administration that is serious about Alaska's role in achieving "energy dominance." It's in Alaska's best interest to respond to these opportunities with resolve.
Claims that a sustainable oil and gas future is "over" in Alaska are in contrast with reality. The U.S. Energy Information Administration, a nonpartisan federal agency, forecasts that more than 50 percent of the world's energy will still come from oil and gas in 2050. To meet those demands, incredible investments are being made that can lead to the United States becoming the world's largest producer, an achievement unthinkable just 10 years ago. Energy companies are projected to invest more than $120 billion in U.S. capital projects in 2018 alone.
Unfortunately, Alaska is projected to receive less than two percent of that $120 billion dollars of U.S. energy investment. Further, Alaska currently ranks 50th in the nation with the highest unemployment rates of any state and remains an expensive place to live and to do business. Policy matters, and Alaska needs the right policies in place to attract more investment.
But still, some Alaska policymakers seem determined to pursue tactics that will ensure investment dollars go elsewhere. On the first day of the 2018 legislative session, yet another bill was introduced in the House to increase production taxes. While the bill remains in the House, the leaders of the Senate have emphatically opposed this latest attempt to change taxes for the eighth time in 13 years.
Further, the state has damaged its business reputation by not refunding small companies on their earned tax credits – refunds critical to moving their discoveries into production. The governor acknowledged these credits need to be paid sooner rather than later and has introduced legislation to resolve the issue and help put Alaskans back to work.
Another looming threat to the oil and gas industry, and to virtually every proposed public or private development, is the so-called Stand for Salmon initiative effort to rewrite the fish habitat permitting system in Alaska. If the proposed initiative were to pass, the Alaska LNG project would be "virtually impossible to permit" according to Alaska Gasline Development Corporation (AGDC) President Keith Meyer. The initiative not only puts future projects at risk, it also jeopardizes current oil and gas operations and transportation project permits. Thankfully, the Walker administration is challenging the constitutionality of the initiative in the Alaska Supreme Court. Additionally, the governor recently indicated that he would do everything in his power to stop the initiative because he doesn't like the idea of using the initiative process, which he described as a "fairly blunt instrument," to make policy changes. The initiative is also opposed by every other declared gubernatorial candidate, regardless of party.
Although confronted by the proposed deal-breaking initiative, AGDC is continuing an innovative approach in pursuing a state-owned natural gas project to get Alaska's natural gas to market. The Alaska Oil & Gas Association (AOGA) has long supported any project that can be economically viable. While many challenges remain, the members of AOGA, in addition to ConocoPhillips Alaska, support the approach of a state-owned project and the current efforts of AGDC to make the Alaska LNG project competitive.
Alaska's mixed policy track record begs this question: Will constant tax proposals, additional regulatory burdens, and the potential for a deal-breaking, full-stop permitting system prevent new capital from making its way to Alaska?
Policy matters. Let's show the world that Alaska is open for business by choosing policies that attract investment, not chase it away.
Kara Moriarty is president/CEO of the Alaska Oil and Gas Association.