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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After a hiatus that lasted more than two decades, a production module was built at the Don Young Port of Alaska and sealifted to the North Slope where it is being installed at Nuna.
Construction took place at Anderson Dock operated by North Star Terminal & Stevedore Company.
“It’s great to see the fabrication of the module take place right here in our backyard and be built by Alaskans,” said Erec Isaacson, president of ConocoPhillips Alaska.
From Oliktok Dock, the module was transported inland to its permanent location at drill site 3T. Nuna will bring Kuparuk’s forty-ninth drill site online and will add 29 development wells that tie back to existing processing facilities at Central Processing Facility 3.
“Kuparuk has played a vital role in our company’s success, contributing significant production for more than 40 years,” says Isaacson. “It’s remarkable to witness new developments like the Nuna project showcasing that this asset remains robust and continues to provide considerable value to our North Slope operations.
ConocoPhillips expects Nuna to boost Kuparuk’s production in the coming years, reaching a peak rate of 20,000 net barrels of oil equivalent per day.
📸 : ConocoPhillips
One of the earliest companies to prospect for oil in Alaska, Chevron is making its final farewell as it sells most of its remaining North Sope assets to ConocoPhillips Alaska.
Chevron first arrived in Alaska in 1888 when it began selling retail products in the territory of Alaska. The company helped develop the state's oil industry in Cook Inlet but exited in 1992, only to return a decade later with its $20 billion purchase of Unocal. It finally sold its Inlet properties in 2011 to Hilcorp.
That sale included 10 platforms: Anna, Baker, Bruce, Dillon, Dolly Varden, Granite Point, Grayling, King Salmon, Monopod and Steelhead. Baker was installed in 1965 on a lease in the North Middle Ground Shoal field, northwest of the community of Nikiski. Ultimately 31.9 million barrels of oil and 15.9 billion cubic feet of natural gas were produced before production was halted in 2003 as oil recovery dwindled to an average of 515 barrels per day.
Oil production was suspended the prior year from the Dillon platform to the south.
Chevron dismantled its Cook Inlet refinery on 470 acres in Nikiski in 1991. The smallest of the company's nine refineries, it processed 18,000 barrels of crude oil daily, producing jet fuel, diesel and asphalt, and employed 20 full-time workers. (See photo below).
Net daily production from its Inlet assets in the sale totaled 3,900 barrels of oil and 85 million cubic feet of natural gas, Chevron said.
Chevron was on the North Slope from the beginning, owning nonoperating interests in more than 2,000 oil and gas wells that produce an estimated 9,400 barrels a day from three oil fields: 4.9% in the Kuparuk River Unit, including Kuparuk Satellite fields; 1.2% in Prudhoe Bay; along with interests in the Kuparuk pipeline. It earlier divested its interests in the trans Alaska pipeline and Point Thomson.
An interesting fact is that Chevron and BP drilled the only test well in the Arctic National Wildlife Refuge on lands owned by the Kaktovik Iñupiat Corporation (KIC) and minerals owned by the Arctic Slope Regional Corporation. The test well was meant to help ASRC and the two oil majors determine what oil and gas resources lie beneath the surface. The results of the well, known as the KIC-1 test well, have been kept secret for decades. In 2022 Chevron and Hilcorp paid $10 million to terminate their ANWR leases.
📸 : Chevron’s Cook Inlet refinery. Alaska State Library Collection
Kevin Gallagher, managing director and CEO of Australian energy company Santos, took a moment in his address to AOGA’s annual conference, to praise one of his Alaska employees, honored with AOGA’s Rising Star award. Julianne Lamb is a geologist, formerly working for predecessor Oil Search in New Guinea and Australia, who is credited with bringing GeoIsotopes analysis to Alaska.
So what does that mean? A whole new oil play. Joe Balash, a former commissioner of the Alaska Department of Natural Resources, credited Lamb’s work with spurring interest in the Nanushuk formation, which was discovered in 2013. “The delineation of the Nanushuk formation has allowed other operators on the North Slope to develop it and reignite the state’s natural resource and fiscal future,” said Balash, who is Santos Senior Vice President of External Affairs.
“Pikka is only the first in an immense portfolio of resources that will be absolutely transformative for Alaska oil production,” Lamb said.
Of that transformative portfolio, Bruce Dingeman, Santos’ Alaska executive vice president, says, “We’ve already got the major permits in place for Phase II, and we’ll hope to progress at pace as we start getting cash flow from Phase I to fund that activity,” he says.
Outside of Pikka are the nearby Quokka and Horseshoe units, still being explored. “Our aim is to level load the work so that we can seamlessly move from one to the other, and then we take a really disciplined approach where we’ll fund those subsequent increments out of cash flow while still returning the healthy dividend to the corporate center,” Dingeman says.
“I’m very excited about our future in Alaska,” Gallaher told AOGA. “There’s plenty of resource still to be developed.”
For more on this company: bit.ly/4dCcF57
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.