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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The ink was barely dry on the U.S. Interior Department’s signature last summer on restrictive new rules for the National Petroleum Reserve-Alaska when the department began planning for expanded “protective areas,” according to the new issue of Alaska Resource Review.
These potentially more restrictive rules impose real costs on Alaskans and the petroleum industry.
“ConocoPhillips, for example, would like to explore potential new Willow discoveries on leases it holds in the NPR-A. Santos Ltd. is concerned that its exploration of leases it holds could cover an extension of the new Horseshoe discovery from state-owned land into the petroleum reserve. Explorer Bill Armstrong, who heads Armstrong Oil and Gas, would like to drill on leases his company holds in the NPR-A, and where he believes a new Pikka or Willow discovery might be made,” the story says.
“Armstrong must be taken seriously because his company led the exploration that led to the Pikka find along with other North Slope discoveries.”
Alaskans were quick to react and jump into the fray.
“This undermines the intent of Congress, which has long designated the NPR-A as a critical area for oil and gas production to support Alaska’s economy and the nation’s energy security,” AOGA CEO Kara Moriarty wrote in a letter to the BLM.
“BLM’s actions are simply not a reasonable interpretation of federal law, let alone the best interpretation of federal law,” wrote Alaska’s Congressional delegation.
More on this developing story here. rdc.memberclicks.net/assets/Resource-Reviews/2024RRFall/Resource%20Review%20Fall%202024%20final%2...
Photo from Bureau of Land Management
Some say our energy future lies in the east – in ANWR – but many in the oil patch say Alaska’s greatest potential is far to the west – in the National Petroleum Reserve – Alaska.
“NPR-A has petroleum-generating systems, reservoir rocks and oil seeps like ANWR,” says Richard Garrard, Chief Technical Officer at Borealis Alaska Oil, Inc., an independent oil company.
NPR-A “is right along the Barrow Arch (Barrow arch is a regional structural high beneath northern Alaska and the Beaufort and Chukchi seas that has yielded most of the North Slope’s oil production), providing the right geological structural history for major finds. Those are already being made, like ConocoPhillips’ new Willow project, which is in the petroleum reserve just west of the large producing North Slope fields.
“Other petroleum discoveries have been made, such as Pikka, now being developed by Santos Ltd. and Repsol. There is also an offshore discovery at Smith Bay further west, as well as a nearby onshore finds,” Garrard said. “Those need further drilling. The Barrow Arch extends further northwest along the Alaska north coast and continues offshore.”
The areas of the petroleum reserve most prospective for discoveries are near the coast and in wetlands important to wildlife, which attracts the attention of conservation groups who lobby for restrictions, writes Tim Bradner in Alaska Economic Report.
“The Interior Department, under Biden, has adopted restrictive policies, for example, by enlarging special protected areas,” Garrard said. “Trump could return these to their original size established by the Clinton administration in 1999, and also undo other restrictive new rules put in place this year by the U.S. Bureau of Land Management.”
These moves would allow companies to explore and develop a region that Garrard and others think is more prospective than ANWR.
“Trump could also undo moratoriums on leasing and exploration in the Beaufort and Chukchi seas off Alaska’s northern coasts. In the 1990s, Shell discovered oil in the Chukchi Sea and Unocal and ARCO also made finds in the Beaufort Sea northwest of the ANWR coast. Restrictions by the government including offshore moratoriums by Biden have discouraged further work on these by companies; however Trump could undo the moratoriums,” Bradner writes.
Photo from Caelus Energy Alaska
From the day Hilcorp took over as operator of Milne Point, it’s been bullish on this field first discovered in 1982.
And the results have paid off. Production averaged 35,757 barrels per day in 2021; the average was 37,466 bpd in 2022, up 4.78% from the previous year. In 2023 the average was 39,944 bpd, up 6.61% from the previous year, and 2024 volumes show an average of 43,474 bpd, up 8.84%.
But it’s not done yet. Hilcorp said it anticipates drilling 19 rotary wells, with 18 potential candidates in the Schrader Bluff formation – half producers, half injectors – and one in the Kuparuk producer.
The company also expects to do coiled tubing drilling operations on three wells, according to Petroleum News. It will continue to use the ASR1 rig for well work and workovers "as required to maintain and enhance production."
Major facility projects include H Pad power fluid separation; return gas injection to F and L pads through existing gas injection lines; L and H pad polymer expansion; return water injection to K Pad; CFP A train internals upgrade; and CFP PL 5 upgrade.
Long range the company said it continues to evaluate additional Schrader Bluff drilling opportunities; evaluate performance from the existing S-203 and planned S-204 Ugnu wells to help determine future Ugnu development; evaluate infill drilling opportunities in the Kuparuk formation; and target facility upgrades to increase the production capacity of the unit.
Photo credit: Hilcorp
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.