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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While job growth is flat across much of Alaska, the North Slope is booming.
Thanks to the Willow and Pikka projects, the oil and gas industry is fueling real economic momentum in the Arctic. These projects are creating thousands of jobs, supporting local contractors and strengthening Alaska’s long-term future.
That’s the conclusion of a new report from the Alaska Department of Labor and Workforce Development that shows job growth is up about 7% in the North Slope and Northwest Arctic region, while most other areas of the state are in the ballpark of 2% to -2%.
“Some of those jobs are in construction, some of them are in transportation,” says Dan Robinson, a researcher with the department. “So we can see the specific oil and gas jobs, but those projects are also driving some job growth in related industries.”
Robinson said that means contractors and other nearby businesses are getting a lift, too.
The Willow project is the largest of its kind to be developed on the North Slope in more than 20 years and is projected to produce 120,000 barrels of oil/day once it’s online in 2029. Santos is expected to begin production of its 80,000/bpd Pikka project late this year or early 2026.
Both ConocoPhillips and Santos prioritize hiring locally. According to Santos, about 80% of the workforce for the Pikka project was hired from within the state.
📸 : Oil Search Alaska
New details have been released about the Sockeye-2 exploratory well that has created such a buzz in oil circles.
Sockeye 2 was drilled on a 325,411-acre exploratory block approximately 10 miles from the Badami oil field on state land. The acreage is owned by Lagniappe Alaska, LLC, an Armstrong company; Oil Search (Alaska), a subsidiary of Santos Ltd.; and APA (Apache) Corp. APA holds a 50% working interest, with operator Lagniappe and partner Santos with 25% each.
"We are excited about the performance from the Sockeye-2 well, which could greatly benefit the state of Alaska and the U.S.," said Bill Armstrong, CEO of Armstrong Oil & Gas. "This discovery significantly extends the prolific Brookian topset play first established with our Pikka discovery in 2013. We have identified analogous anomalies to investigate following on this success."
"The results from the Sockeye-2 flow test are consistent with our expectations, demonstrating a high-quality reservoir, confirming our geologic and geophysical models and de-risking additional prospectivity in the block. We will evaluate the data from the Sockeye-2 well to determine the next steps in our Alaska program," added John J. Christmann, APA Corp. CEO.
"We are especially encouraged by the great reservoir rock. Our average permeability is more than 10-times that of Willow, and 5-times the permeability of the Pikka and Alpine fields," Armstrong said.
"We think it might cover a big area, similar to so many other fields on the North Slope, such as Alpine, Willow and Pikka. One of the advantages of the North Slope is the lack of structural complexity. It’s that quiescence which lends itself to such large fields," he said.
In an interview with Petroleum News, Armstrong described the Sockeye-2 well as "very old school in its performance, in that there was no stimulation or fracking required. It was completed natural. This new reservoir will be an ideal flood candidate for secondary recovery.
"We still have to apprise this discovery for size and how we would most likely develop it, but we are really encouraged by what we have seen," he said.
First quarter results are in, and ConocoPhillips Alaska reports a net income of $327 million.
During the quarter, the company invested more than $1 billion in capital. “We completed the largest winter construction season on the Willow project and achieved critical milestones, keeping the project on track for first oil in 2029,” stated Erec Isaacson, president of ConocoPhillips Alaska.
“We continue to deepen our Alaska portfolio through optimization and exploration. We have a strong pipeline of resource opportunities across our operated assets, which will drive growth in Kuparuk through Nuna, Coyote and viscous developments and in Western North Slope satellite reservoirs. This continuing activity underscores our commitment to Alaska and demonstrates the effectiveness of state fiscal stability in our state,” Isaacson added.
The company paid an estimated $362 million in taxes and royalties, which includes $251 million to the State of Alaska and $111 million to the federal government.
Since 2007, ConocoPhillips Alaska has incurred more than $46 billion in taxes and royalties to the State of Alaska and the federal government. Of that amount, approximately $36 billion went directly to the state.
In that same period, ConocoPhillips Alaska’s earnings were approximately $28 billion.
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