Governor Parnell Signs Historic Bills, Celebrates Future Economic Growth
On Tuesday of this week Governor Sean Parnell signed the oil tax reform Senate Bill 21, the More Alaska Production Act, into law. This historic legislative package could very well move Alaska forward and spur new investment and production. Parnell signed the bill surrounded by legislators and young Alaskans whom he declared "this bill is for you."
Commenting on all the achievements his administration and the legislator accomplished this year, Parnell stated “It’s been an historic year for our state, it’s been a phenomenal year, a comeback year.”
Although critics say that it’s a giveaway to the oil companies, we must look at the facts of what drives business investment in the state to create jobs – the basis of a strong economy. It is unclear how much the new tax structure will cost the state, but Parnell noted his proposed five-year fiscal plan to control State Government spending. That is key when you consider Alaska’s general fund operating budget increased 154% from 2006 to 2012, and the general fund capital budget rose 339%. As oil prices and tax rates rose, spending increased.
Parnell also signed several other bills, including HB4, authorizing the creation of the Alaska Gasline Development Corporation. Its intention is to establish an in-state gas line project underway. HB129 was also signed, which will help to streamline the permitting process, along with SB27 to allow Alaska to take responsibility for dredge-and-fill permits from the U.S. Army Corps of Engineers.
Cook Inlet Revival Continues with Significant Lease Sales
According to the State of Alaska Department of Natural Resources (DNR), the state received nearly $4.5 million in high bids for oil and gas leases in Cook Inlet and a bid for a geothermal lease on Augustine Island during a series of lease sales on May 8, 2013.
Since the state area wide lease sale program, started in 1999, this is the third largest of its kind and the sixth largest in acreage. The Cook Inlet Basis is amongthe oldest oil and gas basins in Alaska, started in the 1950’s. Production peaked in the early 1970s at 230,000 barrels per day (bpd) and is now at about 12,500 bpd.
Among other bidders, Hilcorp Energy Company picked up 19 new leases, spending $2.6 million, nearly half of the high bids offered for 28 tracts sold.
Just three years ago, Cook Inlet was considered a dry hydrocarbon basin, but Hilcorp and others believe there is more production to be had. Hilcorp will be investing $300-$350 million this year to increase output at the fields.
With legislative action to make Cook Inlet more competitive, a strategy at DNR to secure and attract new investors, and a partnership between all the stakeholders, there has been a dramatic increase in oil and gas investment in the area. And, this investment activity is now becoming reality with increased drill rigs, oil exploration and gas production in the inlet.
According to the DNR, this success in new development could point to what is possible on the North Slope to turn around its production decline. And with the signing of the
recent bills by Parnell, that turnaround is more likely than ever before.
Gov. Sean Parnell signed the oil tax reform Senate Bill 21, the More Alaska Production Act, into law during a special meeting of the Anchorage Chamber of Commerce at the Dena'ina Center on Tuesday, May 21, 2012. Gov. Parnell also signed House Bill 4, legislation authorizing the Alaska Gasline Development Corporation to develop, finance and operate an in-state gas pipeline. Senate Bill 27 and House Bill 129, legislation to streamline the state's permitting process. Photo credit: J.J. Harrier, VP Communications Director, Anchorage Chamber of Commerce.