Alaska oil production up, thanks to SB 21



In the way-back machine, we check back to 1978:

  • U.S. Senate voted to turn the Panama Canal over to Panamanian control.
  • Congress voted to allow beer to be home-brewed in the United States.
  • Production on Alaska’s North Slope increased by 3,233 percent.

The North Slope oil flowed by the millions of barrels for a decade. Oil production topped in 1988, and then started its gradual decline, which continued every year except 2002. That year was when Alpine came into production.

Now in 2016: Even though oil prices are lackluster at best, production on the North Slope is up 3 percent.

The question is why. The answer is Senate Bill 21.

Production going up for the first time in 14 years was a direct result of the More Alaska Production Act, which restructured oil taxes to take less from producers when prices were high as they were back in 2013, and more from them when prices were low, as they are in 2016.

A bigger question is: Why didn’t Alaska see the investment in North Slope production when prices were between $100 and $120 a barrel?

The answer is, it’s about the policy. Companies lost interest in Alaska when taxed to the max under ACES (Alaska’s Clear and Equitable Share), the old tax structure that SB 21 fixed.

It was a fight to be sure, and Democrats even petitioned to take it to the people to overturn in a referendum. The people of Alaska said “No on 1” — albeit narrowly — and SB 21 became the spark that reignited exploration and production in the big oil patch of the north.

For some, it was good enough if Alaska could stem the decline, while for others, the million-barrel hope is still alive. Today, we herald a 3 percent increase, and Alaskans will take their celebrations while they can. After all, the tax policies in Alaska just keep changing.

“Production did not just flatten out, but rose by more than three percent,” said Kara Moriarty, president of Alaska Oil and Gas Association. “What really stands out about the production increase is that it happened during a period of low oil prices. This didn’t happen by accident: a lot of investment dollars were spent in Alaska after SB 21 passed but prior to the drop in oil prices, and we are seeing those results now.”

The oil from the North Slope flows through the Trans Alaska Pipeline System and generates royalty payments that feed into the Alaska Permanent Fund, and it funds State government.


A 3 percent increase may seem like a fraction of what Alaska needs, considering the State’s spending habits and the long trajectory downward for production. But in this environment, while not quite ready for a champagne toast, 3 percent is significant.

HB 247 came along this year at the governor’s request and restructured oil and gas tax policy once again, because without legalized gambling, changing oil taxes is Alaska’s favorite game of chance.

For the North Slope, the Walker law defined when fields are “new” and when they are “old,” as different tax and credit rules apply. HB 247 was more of a hit to Cook Inlet than the North Slope, but the Slope didn’t get by unscathed either: Smaller producers will feel the hit.

When the Legislature convenes next week, it will be asked by the governor to take up more oil tax changes: Net Operating Losses.

Thus, the State’s legalized gambling habit of “oil tax roulette” continues into the dog days of summer.