I believe that declining production is the biggest long-term risk to our economy and to state government revenues. Just slowing the rate of decline will require significant new investment by the oil industry.
Northrim took an active role in advocating for changes in the State’s tax policies in the last year, including helping to found the Make Alaska Competitive Coalition to educate more Alaskans about the critical need to increase oil production. The results of the most recent legislative session were mixed, with the Governor stepping up to propose changes to ACES and the House of Representatives passing a version of the Governor’s bill. The Senate, on the other hand, continued the divisive politics of the past, pitting Alaskans against our most important industry.
While other states must grapple with economic forces outside of their control, Alaska’s policymakers have the ability – and the responsibility – to take a long term view of Alaska’s revenues and expenses. We need to create better alignment between the State of Alaska and the oil industry.
We hope that over the next few months our leaders can return to a productive dialogue about this issue – starting with the points I believe we can all agree on:
- We need to increase oil production to support our private sector economy and state government. There is a real risk that in just a few years, production may decline to a point where the pipeline is not technically viable, and we will have no way to get our resources to market. We are closer to that point than we want to be.
- We can get increased oil production through new exploration, more development in older fields, and new technology to produce heavy oil, but all of these will require significant additional investment because the easy oil is gone and operating costs have increased significantly.
- The three major items under the State’s control that impact investment decisions are taxes, regulation, and access to resources. We need to make meaningful changes to all of these things.
If we can start from these points of agreement, we can move forward to the more difficult discussions, and decisions, that must be made soon to increase oil production. The Governor’s “million barrels per day” goal is a good one – let’s all work together as Alaskans to achieve it.