Alaska’s had a great ride, but it’s not sustainable.

Dear KEEP Supporter,

As you know, the KEEP Alaska Competitive Coalition, 5,000 members strong, is a broad based group of native corporations, businesses, unions and individual Alaskans who share one common objective: We care deeply about our state and its economic future.

Our mission is to promote investment in resource development and secure Alaska’s economic future by advocating for a durable, sustainable and balanced state fiscal plan that provides for stable, competitive tax policies.  We recognize Alaska must address its fiscal crisis, and make meaningful progress toward fixing it, so that our oil industry, and all of our resource industries, can survive and prosper.

The oil industry has paid for almost 90% of Alaska’s government. Oil has funded our schools, roads, airports and public safety. Oil strongly supports our charities and has created about 1/3 of Alaska’s jobs. Oil has funded Alaska’s $55 billion dollar permanent fund and has allowed Alaskans the luxury of not having to pay state income or sales taxes.

But, times have changed. It’s been a great ride, but it’s not sustainable.

Oil production has fallen to ¼ of its peak, our pipeline is ¾ empty and oil prices are low. While our General Fund budget has been reduced over the past three years, it still must be reduced further.

Alaska is in a recession due to low oil prices and an unsustainable fiscal situation that discourages investment. Threats to raise taxes on our resources industries also discourage investment.

We will have to compete for investment or we will fail. We will have to continue to reduce the cost of state government. We will have to utilize earnings from our $55 billion dollar permanent fund on a sustainable basis, to help pay for state services. We will need to reduce the amount of our PFD checks. And we may have to start paying our own way, with some form of new taxes if necessary.

We must do all this without taxing away all of the incentives of our resource industries that invest heavily in our state and create jobs.

And, we must change now or accept a worsened economy. With every delay we forgo many of the options that are on the table now and also face elimination of the dividend program out of necessity.

Now is the time for action. We cannot continue to kick the can down the road.

This is where the KEEP Alaska Competitive Coalition can make a difference. We must urge our employees, colleagues, friends, family and others  to contact their legislator and ask them to create and support a solution to Alaska’s fiscal crisis. Action must be taken this legislative session and should include cuts, restructuring the permanent fund, and may include new taxes such as an income tax, a sales tax, motor fuel tax and/or other miscellaneous consumption taxes.

And we must remind our representatives in Juneau to not kill our resource industries with unstable tax policies and over taxation in the process.

KEEP has developed a toolkit, similar to what we did during the Vote No on 1 campaign, which will help us deliver our message. The toolkit includes a short video which succinctly explains our fiscal crisis, and our options to fix it, as well as a PowerPoint presentation and printable fact sheet. We have updated our website and now have a social media component where you can review our latest posts and join the conversation.

Once again, thank you for your support of the KEEP Alaska Competitive Coalition. We look forward to working with you to ensure Alaska will be open for business for years to come.

 

Jim Jansen
Co-chair
Keep Alaska Competitive
Marc Langland
Co-chair
Keep Alaska Competitive

Alaskans feel the hurt

“The decisions that are going to be made from now to the end of the session are important to those people who have jobs and very important to young Alaskans who will be seeking good-paying jobs and residents who receive financial assistance from the State. We have had layoffs in excess of 300 and experienced pay cuts from 10–20 percent all the way to the top.”

-Jim Udelhoven, Chief Executive Officer, Udelhoven Oilfield System Services, Inc.

 

“Despite the 70% percent drop in oil prices from 2014 to 2016, the annual decline curve in North Slope oil production is actually leveling off – from 6.6 percent to 1 percent in the same time period. This boost in North Slope oil production is no accident. Rather, it is a direct result of $5 billion of new investment by the oil and gas industry that was prompted by the passage of SB 21. Since 2014, Arctic Slope Regional Corporation (ASRC) has invested more than $200 million to expand our infrastructure and increase our capabilities to support responsible oil and gas development on the North Slope.  ASRC continues to actively evaluate investment opportunities within the state of Alaska.  However, the ongoing dialogue regarding an increase in North Slope production taxes is concerning and could lead us to allocate our investment capital to opportunities outside of Alaska. Accordingly, we encourage the governor and the legislature to take a long-term view to solving the state’s fiscal challenges and continue to make Alaska an attractive place to invest.”

– Butch Lincoln, Executive Vice President and Chief Operating Officer, ASRC

 

“NANA has already lost over 500 good paying oil related industry jobs this past year. We are very concerned that the oil industry will continued its decline in Alaska if we put additional costs and taxes on an already stressed industry. Further industry decline will result in more lost Alaskan jobs and a further deterioration of our state wide economy.”

– Helvi Sandvik, President, NANA Development Corp.

 

“I am not optimistic about further investments.  SB 21 is working & frankly we should be doing more to spur investment from the resource industry instead of taxing them more.  When you take away money from the private sector to fund the public, it hurts those of us that employ your constituents and all of our local vendors.  Like clockwork, every other year we have to keep lobbying the legislature for the right to work; please keep Alaska competitive.”

– Genevieve Schok Jr., Flowline Alaska, Fairbanks

Tax reform works – even at $30/barrel oil

Should anyone question the impact of SB 21 and Alaska’s anchor tax credits, tell them to look north – and south. Despite staggering industry loses around the world, the North Slope and Cook Inlet are humming with important projects.

In fact, the capital infusion since SB 21 became law reduced North Slope production decline to a mere 1 percent last year.

Here’s a summary of projects:

After completing its first exploration well in Smith Bay, Caelus Energy is drilling its second well. Smith Bay is a promising prospect offshore NPR-A. Caelus is continuing with development activities in its Oooguruk unit, including the Nuna development, which could produce new oil for our pipeline right around the corner, but only with a stable fiscal terms and some price rebound.

The new Conoco-Phillips CD-5 development is performing much better than expected, reaching peak production of 16,000 b/d. The company is now drilling the ninth of 15 production and injector wells and plans a new exploration well near CD-5. Activity remains brisk in NPR-A with development of a production site at GMT-1 and planning for GMT-2. In other news, the company’s Alaska operations escaped another round of capital budget reductions virtually unscathed, thanks to tax reform.

BP is aggressively re-energizing Prudhoe Bay with the completion of eight wells, 46 new sidetrack wells and 420 well workovers last year.

Hilcorp plans 10 development wells and 16 well workovers on its North Slope fields this year.

88 Energy and partner Burgandy Xploration completed a test well of shale resources 65 miles south of Deadhorse and are now conducting extensive seismic in the area.

Arctic Slope Regional Corp.’s AEX subsidiary is drilling a well on ASRC-owed state leases and Great Bear Petroleum has a large seismic program under way.

Oil production in Cook Inlet now averages 18,000 b/d, the highest since 2011, primarily due to Hilcorp. The company has invested more than $1 billion in Cook Inlet projects and drilled over 50 wells. “It’s no secret that Alaska’s tax credit system and the Cook Inlet Recovery act were key drivers in bringing Hilcorp to Alaska in our investments to date,” Hilcorp recently told House Resources. You can read their testimony here.

Also in Cook Inlet, Furie Operating Alaska is selling gas from its new platform and has a jack-up rig en route to Alaska.