Morning Headlamp — BP cuts deeper than expected & AK construction to see declines in 2016

BP cuts worsen. In reference to BP’s recently announced job cuts, Rep. Ben Nageak said it’s going to be tough to “stop the bleeding…It’s gonna have an effect that’s gonna trickle down to businesses all over the state.” BP said on Monday it will be cutting another four percent of its workforce in Alaska in addition to the 13 percent cut the oil giant announced in January. A BP spokesperson said the exact number of layoffs isn’t yet known. However, the previously announced 13 percent cut to its workforce of 2,100 employees and specialty contractors, which amounted to a loss of about 270 workers has increased to approximately 17 percent as a result of the recently announced decision to reduce operating rigs at Prudhoe Bay, according to BP Alaska spokesperson Dawn Patience.

With even more cuts than originally predicted, how can lawmakers think about raising taxes on an industry that is hemorrhaging Alaskan jobs?

UK Abolishes Oil Tax.  UK Chancellor of the Exchequer George Osborne said in his Wednesday speech announcing the 2016 budget that the UK’s “broad shoulders” will support the oil and gas industry. The UK is doing so by enacting a major overhaul of the North Sea tax regime in response to the plunge in oil prices that continues to imperil the oil and gas sector. Osborne said the Petroleum Revenue Tax (PRT) has been “effectively abolished.” The PRT was already cut last year from 50% to 35%. Wednesday’s change will be retroactively effective starting from January 1, 2016. Osborne said he was “cutting in half the supplementary charge on oil and gas from 20% to 10% and I am effectively abolishing Petroleum Revenue Tax too – backing this key Scottish industry and supporting jobs right across Britain.” Scottish secretary David Mundell was quoted as saying that Osborne’s budget announcement is “very good for Scotland” and “shows the UK government has listened and delivered.” Following the announcement of Osborne’s budget, BP shares rose 3.5% on the day, and Shell rose 3.13%. Earlier this year, the Scottish government introduced a new $17.2 million (12 million pound) fund to help those who have been laid off as a result of the downturn to find new employment and acquire new skills.

Headlamp firmly applauds the actions our friends across the pond are taking in response to record low oil prices. It is refreshing to see leaders of a government actually take job losses in the oil and gas industry seriously. The UK is responding in a favorable and responsible way to help an industry that employs thousands of their citizens. Maybe Alaskan policy makers should spend an afternoon sipping some Earl Grey, and learn how the UK is encouraging investment in these low oil prices.

On the lingering budget issue, members of the Republican-led Senate Finance Committee on Tuesday said they would rather spend down Alaska’s big savings accounts than “get into the taxing business and adopt Gov. Bill Walker’s financial plan. “There’s been some tendency on the part of the administration to start throwing around orders to the Legislature, and we just don’t respond to that,” said Sen. Pete Kelly. Headlamp hopes this sentiment continues into the next few weeks as lawmakers discuss Gov. Walker’s tax plans for the oil and gas industry.

The Interior Energy Project officials discussed the updated timeline as part of a progress report to the House Special Committee on Energy on Tuesday. The state recently announced it had selected Washington-based Avista Corp. subsidiary Salix to partner on a Cook Inlet-area gas liquefaction plant to source the gas. Interior Energy Project team lead Gene Therriault said the agreement with Salix should be finalized by June, allowing preliminary work to start at the Cook Inlet site this summer and fall. Residential customers are expected to start converting by the summer of 2017.

Building a bigger problem than we realize. The Alaska Association of General Contractors announced that the construction industry could lose as much as 18 percent of its jobs in 2016.  “18 percent is a sizable amount with a lot of it coming from the energy sector.” said Alaska AGC Executive Director John Mackinnon. “You take 18,000 construction workers in the state and 18 percent of them if there’s a decline, that could amount to over 3,000 jobs not being here next year.” State economist Neal Fried said the downturn in construction is not surprising given the industry’s close ties to the rest of the state’s economy. “Construction really is an accommodator for the rest of our economy. When the economy grows it means you build more facilities, and when it is slowing down the opposite occurs,” Freid said. As Headlamp has consistently said, policies that don’t incentivize growth in Alaska’s biggest industry—even during a low price environment—will cause a ripple effect across more than just industry jobs.

 

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First Reads

Fallout from BP job cut announcement ripples across Alaska
KTUU, Travis Khachatoorian, March 15, 2016

BP job cuts higher than previously announced
Alaska Dispatch News, Alex DeMarban, March 15, 2016

Senate leaders: We’re not getting into ‘the taxing business’
Alaska Dispatch News, Nathaniel Herz, March 15, 2016

New timeline set for Fairbanks liquefied natural gas delivery
Fairbanks Daily News Miner, Matt Buxton, March 16, 2016

New Obama offshore plan eyes possible new Arctic protections
Alaska Dispatch News, Erica Martinson, March 15, 2016

Alaska construction industry faces possible loss of more than 3,000 jobs in 2016
KTUU, Patrick Enslow, March 15, 2016