ADMINSTRATION FINALLY ADMITS OIL PRODUCTION IS INCREASING
For three years in a row, Alaska’s oil fields have been producing more each year. That hasn’t happened since the 1980s.
Since Alaskans voted by referendum to support Senate Bill 21, the oil tax reform bill of 2013, energy companies felt they could invest and get a fair shake from the State, and oil production began increasing as a result.
But last spring, the Walker Administration’s production forecast predicted a catastrophic 12 percent decline for FY 2018 — that’s the current fiscal year. The administration had to walk back its forecast, blaming it on “stale numbers.”
The Department of Revenue also predicted that within 10 years, the pipeline would be carrying less than 350,000 barrels a day, a level at which many experts say the pipeline would struggle to operate.
Instead, there’s been a 2 percent increase, year over year — for three consecutive years. Today, the pipeline is carrying an average of 533,000 barrels a day, some 6,000 barrels more per day than last year.
A 14 PERCENT MISS AND THE ORIGINS OF FAKE NEWS
The 12 percent drop predicted by Walker, and the 2 percent increase in actual production — for a whopping 14 percent swing in projected output — shows that the Departments of Natural Resources and Revenue are still struggling to produce their own forecasts, which used to be done by a third party contractor.
It also may show that the Administration is willing to present fake numbers to lawmakers and the public in order to create a fake fiscal crisis that would convince legislators to enact one or more of the governor’s tax proposals.
“You can’t ask for taxes if the people don’t believe you. Once people figure it out, you have a hard time restoring crediblity.” – Tuckerman Babcock, chair of the Alaska Republican Party.
Under the old ACES tax regime, implemented during the Palin Administration, production was dropping more than 7 percent per year.
Today, the long-term declines have given way to actual increases. Much of the increased production this year is coming from Caelus, Hilcorp, ConocoPhillips, BP, and Exxon.
Hilcorp and Caelus came into the state, in part, to take part in the tax credit program. Hilcorp started in Alaska with the Cook Inlet Recovery Act, and did well enough that it purchased several fields on the North Slope and is now the poster child for how tax credits worked to increase production.
Caelus is still waiting for its credits to be paid.
MORE OIL ON THE WAY — IF ALASKA REMAINS STABLE
Armstrong Oil and Gas earlier this year predicted it has found 1.2 billion barrels of light crude, which may be the largest onshore discovery in America for the past 30 years.
The field is located in a prospect called Horseshoe, near the North Slope village of Nuiqsut and production could start in 2021 with 120,000 barrels a day, according to Plattes Analytics.
Caelus Energy has a huge find at Smith Bay on the North Slope.
Because of the conservative nature of the oil forecasts, only a fraction of those finds is included in the state’s prediction, which bodes well for production stability on the North Slope.
“The voters got it right with SB 21,” said one oil analyst, who has worked with oil tax legislation for several years. “Now if the state would pay its tax credits and get the hell outta the way, you would see a huge spike in production.”