Regulatory and fiscal stability are key
to vibrant resource industry
It’s a new day on the North Slope despite the challenges that come with operating in the Arctic – high costs, harsh weather, supply chain issues, legal hurdles and struggles to find adequate financing.
For the first time in a long time North Slope production is projected to remain stable in the near term and increase in the late 2020s. This is excellent news for Alaska. Resource industries, particularly oil and gas, form the backbone of our economy. They are labor intensive, pay some of the best wages in the state and require continued capital investment to maintain or expand production levels. Production is key to jobs and revenue for Alaska.
We cannot control many of the challenges Arctic operations bring, but we can maintain stable tax policies that attract the capital needed to keep our resource industries healthy so they can produce jobs and revenues for Alaskans.
What’s at stake
$3.1B
State & Local Revenue
FY19
77,600
Alaskan Jobs Supported
Direct/Indirect
$549M
Grow the Permanent Fund
FY22 Dedicated Revenues to Corpus
$4.4B
Spending with Local Businesses
Annual
Source: “The Role of the Oil and Gas Industry in Alaska’s Economy,” January 2020, McKinley Research
Letter from the co-chairs
Fair and Competitive Oil Taxes Are Working
There is a resurgence in oil production and jobs in Alaska that is directly related to our current oil tax policy. SB 21, a fair and competitive tax policy, replaced the antiquated ACES tax structure that drove down petroleum investment for more than a decade. Thanks to SB 21, Alaskans have the greatest opportunity of our generation on the North Slope today.
Some present and former legislators argue that SB 21 was a mistake, but the facts speak for themselves.
The Willow and Pikka projects, years in the making, are in active development. These and other robust investments in Alaska’s future would not have occurred under the previous punitive tax regime. Between the Willow and Pikka projects alone, the oil and gas industry is spending over $10 billion in Alaska in the next few years, with each project generating 2,500 construction jobs and hundreds of operating jobs.
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ConocoPhillips Alaska reported a net income of $267 million in the third quarter of 2024 but paid out more in taxes and royalties on its Alaska production, the company announced.
During the quarter, the company paid an estimated $341 million in taxes and royalties, which includes $251 million to the State of Alaska and $90 million to the federal government.
The taxes paid in Alaska include the company’s property tax payments to the North Slope Borough, the regional municipal government for the North Slope.
Additionally, in the third quarter of 2024, ConocoPhillips invested $691 million in its Alaska capital projects, mainly in new development work.
“Continued progress on projects like Willow and Nuna, along with our agreement to acquire certain Chevron oil and gas assets in Alaska, underscores our commitment to Alaska and demonstrates the effectiveness of the stable fiscal regime,” said Erec Isaacson, president of ConocoPhillips Alaska.
Since 2007, ConocoPhillips Alaska has incurred approximately $45 billion in taxes and royalties to the State of Alaska and the federal government. Of that amount, about $35 billion went directly to the state.
In that same period, ConocoPhillips Alaska’s earnings were over $27 billion.
“The state Legislature enacted a major overhaul of its oil and gas production tax system in 2013, in Senate Bill 21. The legislation was controversial, but it survived a citizen initiative to repeal it with a statewide vote. Alaska’s fiscal and tax system has been stable during the past 10 years, which encouraged new drilling and discoveries like Willow and Pikka, a find now being developed by Santos Ltd. and Repsol” according to a story in the winter edition of the Alliance Link.
Photo by ConocoPhillips Alaska
While Willow and Pikka grab most of the headlines, “Projects like Nuna create hundreds of jobs in Alaska, contribute to a stable local economy and demonstrate the remarkable resource development potential that Alaska’s older legacy fields still have,” says Erec S. Isaacson, president, ConocoPhillips Alaska.
“The additional drilling opportunities we’ve identified at Nuna are a positive development that should increase oil production at Kuparuk. Our investment in this project was approved due to Alaska’s stable fiscal regime, which is clearly working to promote new and ongoing investment.”
The project will add 29 development wells, on-pad infrastructure and pipelines that tie back to the existing Kuparuk River processing facilities. Drilling started in September and is expected to continue for several years at the new drillsite, which is designated as Nuna 3T in the field. It is the 49th drillsite built in the Kuparuk River field since production began.
Nuna’s production module was built in Alaska and moved to the North Slope by barge from a fabrication site in Anchorage.
Nuna has a long history. Pioneer Natural Resources, an independent that previously operated on the Slope, discovered Nuna in mid-2012. Caelus Energy, another independent, bought out Pioneer and took over as operator at Nuna in 2014.
Nuna was a confirmed discovery and it was sanctioned by Caelus in 2015. About $480 million was invested in drilling and construction prior to the sanction, Caelus said at the time. A 2.5-mile road and 22-acre production pad was built, enough to qualify Nuna for state royalty reduction.
In the past year, ConocoPhillips has invested more than $2 billion in its Alaska projects, which include Willow and Nuna. Willow is planned for completion and startup in 2029. It will add an estimated 180,000 barrels per day to Alaska production in the following years.
Photo by ConocoPhillips Alaska
The state of Alaska is projecting stable oil production during the next two years, but there are increases expected in the future with new North Slope projects now under construction, according to the state Department of Revenue’s latest revenue and production forecast, issued in December.
Near-term prospects for production growth are mixed until Pikka and Willow begin producing in 2026 and 2029. A lower oil price outlook is also putting the damper on state revenue expectations, state officials said following release of the state’s December forecast, according to a story in the winter edition of the Alliance Link.
The state revenue and natural resources departments work together on oil revenue and production forecasts. Complete forecast here: tax.alaska.gov/programs/programs/reports/RSB.aspx?Year=2024&Type=Fall
“One challenge is production in the existing large fields on the Slope is declining faster than anticipated. Production is expected to be 10,200 barrels per day lower this year, on average, compared with what was forecast last March, according to the production forecast. Similarly, the latest for 2026 average oil production is 12,600 barrels per day below the March forecast, according to the outlook,” the story states.
“Current output, year-over-year oil production, is generally stable at 460,000 barrels per day to 480,000 barrels per day, depending on the season, but state officials had expected more incremental additions in producing fields to offset natural decline in the reservoirs, which are aging.”
The mission of KEEP Alaska Competitive is to promote and preserve competitive, fair and stable taxes on Alaska’s resource industries to enhance investment, jobs and production to secure Alaska’s long term economic future.