Alaska's oil production continued to decline in the State's fiscal year 2011 that ended in June. Statewide production averaged 608,000 barrels per day (bpd), falling 7% from 652,000 bpd in fiscal year 2010. The peak production was over 2 million bpd in 1988 and has declined continuously over the last two decades. Alaska dropped below the 1 million bpd mark in 2004.
This troubling trend is often considered the most important long-term economic issue facing the state of Alaska. The problem does not stem from a lack of potential energy resources to be developed. Billions of barrels of recoverable oil are known to exist in places like ANWR, NPR-A and off-shore in the Beaufort and Chukchi Seas.
However, much of the wealth of resources exists under Federal lands. Legal access to explore for the energy, approval of regulatory permits and onerous state severance tax issues have all slowed the pace of development or blocked it outright. Because the issues are political in nature and not technological it is possible to see an improvement of production numbers in the future.
There has not been a pressing need for the State Legislature to act decisively on this issue because revenues to the government have been robust even as production declines. This is due to higher production tax rates and continued high prices for Alaska's oil.
Oil prices that averaged under $20 a barrel for decades suddenly began to rise in 2005. By 2008 they averaged over $90 a barrel and in fiscal year 2011 prices averaged a record high $94. In 2006, Alaska passed a new progressive oil tax structure. This increased the production taxes paid by oil companies by a fixed percentage for every dollar change in the price of a barrel of oil. The State is now collecting billions more than in the previous system.
As a result, State operating and capital budgets have grown to record levels. Despite dramatic spending increases, revenue surpluses have been achieved for the past seven consecutive fiscal years. The private sector has expressed their concern over the declining production trend for many years, but with the higher oil prices and production taxes the government has not felt the pressure in their budgets.
The future of Alaska's energy sector can be very productive if tangible regulatory and tax adjustments are approved by State and Federal policy makers to make energy investment more competitive in Alaska.
Did you catch this, Mark?
http://www.newsminer.com/pages/full_story/push?blog-entry-Oil+tax+debate+extends+to+handling+of+pipeline+low-flow+studies%20&id=17070209&instance=blogs_editors_desk
Posted by: Chris Eshleman | Tuesday, January 17, 2012 at 03:28 AM