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, with Pikka now expecting first production by the end of the year. 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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Santos is still on track for a year-end start.
A story in the latest Alaska Economic Report says the company “is bullish about completing its Pikka project and beginning construction at the end of this year, but the company cautions that this will depend on logistics and weather affecting delivery of modules on barges up Canada’s Hay River.
“The company’s official start date is still mid-2026, but fingers are crossed for late this year,” the newsletter reported. “The ramp-up to 80,000 barrels per day production will happen fairly quickly and Pikka should stay at that plateau for several years.”
Phase II is expected to double Santos’ Alaska production.
It’s full steam ahead for Hilcorp – at least for now.
In an April 2 briefing, Hilcorp told legislators it had big plans to grow production on the North Slope, particularly at Milne Point, where it expects to reach 60,000 barrels per day in three years. That’s up from the 18,000 barrels per day when Hilcorp took over the field in 2014. The company now has 10 drill rigs operating, seven on the North Slope and three in Cook Inlet.
Other highlights from the presentation:
- Milne Point production growth has added $500 million in new state revenue, consisting of $290 million in property tax, $130 million in royalties and $80 million in production tax
- Hilcorp’s 2025 Alaska investment is $750 million
- The company will add 100,000 barrels per day in new production this year
- Prudhoe Bay production has been stabilized after years of 4% annual declines
- The company expects to increase its North Slope production by 5% in 2025 and has a five-year goal of a 10% cumulative increase
- Employment in Alaska is at 1,700, with an additional 2,500 contractor employees
- The company spends $750 million a year with Alaska vendors
- 70% of Hilcorp’s corporate assets are in Alaska
Photo from Alaska Oil and Gas Association
Alaska is beginning to enjoy HUGE gains from 12 years of stable oil taxes. KEEP’s new video explains why.
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.
Keep Alaska Competitive Coalition Board of Directors:
- Jim Jansen, Lynden, Inc.
- Joe Schierhorn, Northrim Bank
- Bill Corbus
- Aaron Schutt, Doyon, Lmtd.
- Dave Karp, Saltchuk
- Gary Dixon, Alaska Teamsters Union
- Vic Angoco, Matson
- Harry McDonald
- Jon Cook
- Elizabeth Stevens, Executive Director