Regulatory and fiscal stability herald bright future for investment in Alaska
There is a renaissance underway on the North Slope driven primarily by two huge projects – Santos’ and Eni’s Pikka development and ConocoPhillips’ Willow. Together, these two, new oil fields will increase production to levels not seen in in two decades.
Despite the challenges that come with operating in the Arctic – high costs, harsh weather, supply chain issues, legal hurdles and fluctuating oil prices –Alaska can expect $22 billion in planned oil and gas industry investment between 2025 and 2030, according to a petroleum economics study by Anchorage-based McKinley Research.
“By 2034, more than 60% of North Slope production will come from fields that, today, have yet to put a single drop into the Trans Alaska Pipeline System,” the study found.
We cannot control many of the challenges Arctic operations bring, but we can maintain fair and stable tax policies that attract the capital needed to keep our resource industries healthy so they can produce jobs and revenues for Alaskans.
Let’s keep Alaska competitive!
What’s at stake
$4B
State & Local Revenue
FY25
70,425
Alaskan Jobs Supported
Direct/Indirect
$0.5B
Grow the Permanent Fund
FY22 Dedicated Revenues to Corpus
$5.8B
Spending with Local Businesses
Annual
Source: McKinley Research for AOGA
Stable tax policy leads to resource renaissance on the North Slope
The federal government wants to reopen about a million acres in the National Petroleum Reserve–Alaska near Teshekpuk Lake.
The acreage had been protected under a conservation agreement with a Native coalition known as Nuiqsut Trilateral. The Trump administration canceled the agreement in December ahead of an oil lease sale in March, but U.S. District Court Judge Sharon Gleason blocked the lease sale in parts of the protected area.
Last month, the U.S. Department of the Interior asked the 9th U.S. Circuit Court of Appeals to review.
Lawsuits were filed, saying the cancellation was illegal, as was Gleason’s decision to place the area off limits to leasing while the case goes forward.
The federal government’s opening arguments are due by July 6, with the last briefs expected in August.
Meanwhile, written arguments in the underlying case are scheduled to be finished by the end of June, with oral courtroom arguments to follow.
PHOTO CREDIT: Jim Dau, Bureau of Land Management
When Pikka hits full production of 80,000 barrels/day, it will be the second-largest producing field on Alaska’s North Slope.
“This is one of the most significant achievements on the North Slope in decades and further cements the region’s renaissance. Pikka will help refill the Trans-Alaska Pipeline System, create great jobs for Alaskans and bring billions to the state over its lifespan — benefiting all who live here,” said Sen. Lisa Murkowski in a news release.
“It will be the anchor asset that underpins our long-term growth,” said Bruce Dingeman, Santos’ Executive Vice President and President Alaska. “It’s a core growth pillar in Santos’ portfolio.”
Lawmakers, oil advocates and the industry call the production a “major milestone,” and predict roughly 400 full-time jobs. Santos expects Pikka to produce 400 million barrels of oil over its expected lifetime of 30 years.
While it’s large, it’s not huge like the legacy fields of the ‘70s.
“It’s not Prudhoe Bay,” said veteran journalist Larry Persily. Prudhoe Bay alone averaged roughly 202,600 barrels per day from 2019-2023 fiscal years, according to data from the Alaska Department of Revenue.
Still, if Pikka reaches the 80,000 barrels per day that Santos – and its partner Repsol – forecast, it would be the second-largest producing field in the state after Prudhoe Bay. At more than $3 billion, it’s also one of the most expensive.
Photo Credit: Santos
Some of the world’s largest oil companies are returning to explore in the Alaska Arctic as they seek to replenish reserves, diversify their portfolios and capitalize on Washington’s promotion of fossil fuels, writes the Financial Times of London. ExxonMobil, Shell and Repsol are among the producers that bid a record $163 million in March for leases in the National Petroleum Reserve-Alaska, “an underexplored area estimated by the U.S. Geological Survey to hold 8.8 billion barrels of recoverable oil.”
The return of ExxonMobil and Shell after an almost decade-long hiatus represents a success for the White House, which has relaxed environmental rules and expanded lease sales. This was especially true for Shell, “which relinquished a set of oil leases in an area of the North Slope, West Harrison Bay, that some observers say the company’s own geologists were salivating over,” wrote the Anchorage Daily News. The leases were Shell’s last majority-owned properties in the state, following its decision to give up a batch of federal offshore leases in 2016.
“Alaska is a fantastic opportunity,” said Francisco Gea, head of upstream at Repsol, whose joint venture with Shell secured the largest number of leases in the recent auction. The return of Shell and Exxon surprised industry experts. Shell said in 2015 it was ceasing exploration in Alaska for the “foreseeable future” after losing $7 billion on a failed offshore drilling campaign. Shell CEO Wael Sawan told the Financial Times the decision to return was driven by a desire to replenish the “funnel of opportunities” in areas where the group could differentiate its exploration, appraisal and development.
“It is a very, very, very different part of Alaska that we have gone to,” he said. “This is an onshore exploration opportunity in a very well-established basin that’s been producing for some time.” ExxonMobil has focused its exploration on other parts of the world over the past decade, particularly Guyana. Both companies have been tempted back to Alaska following major discoveries by independent U.S. wildcatter prospector Bill Armstrong, and the recent development of projects by ConocoPhillips and Santos/Repsol.
Santos and Repsol’s $4.5 billion Pikka project began operating last month and will increase production to 80,000 barrels a day, while ConocoPhillips’ $9 billion Willow project is expected to start up in 2029 and produce 180,000 barrels per day.
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, with Pikka now expecting first production any day now. 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, with each project generating thousands of construction jobs and hundreds of operating jobs.
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