Morning Headlamp — “New oil” optimism and Gov. Walker “pleads” with the President

In with the “new oil.” According to a new study, “new oil” fields are generating about 50,000 barrels a day and are helping aid Alaska’s production decline. That proportion of new oil could grow in the next two years if planned projects are completed, giving it an even larger share of overall production. Democratic lawmakers have criticized the small oil fields—claiming that the production tax rates are not high enough. Kara Moriarty, president of the Alaska Oil and Gas Association, pointed out that “new oil” pays income taxes and property taxes in addition to royalties, regardless of prices. “Bottom line, Rep. Gara seems to support raising taxes on an industry that by the state’s own admission is losing money,” Moriarty said. “We are hopeful the Department of Revenue will share a full analysis and impact of the governor’s tax policy proposal in public and with the House Resources Committee in the near future. Headlamp is happy to hear about the development of these new oil plays.  SB 21 and our credit system, restored competitiveness and attracted billions in new capital to the state, and has helped Alaska thus far avoid the calamities occurring in the Lower 48 oil and gas industry. Daily headlines in the Lower 48 are filled with news of major layoffs, countless rig shut downs, and companies filing for bankruptcy. Uprooting the tax system, as Gov. Walker and Rep. Gara want, will undoubtedly result in job losses, project delays, and push Alaska closer to the brink of recession. 

Walker pleads with Obama for oil. At yesterday’s National Governors Association meeting at the White House, Gov. Bill Walker pleaded for more access to drill on federal land, pointing to the state’s massive budget deficit. “We got problems,” Walker told the president. “We have an oil pipeline that’s empty. I need to fill it up. There’s a lot of oil up there, and we’re going to get it safely. And thank you for some of your positions you’ve taken, but we need to put oil in that pipeline.” Headlamp would like to thank Gov. Walker for taking Alaskan issues directly to the President and stressing Alaska’s—and the nation’s—need for responsible resource development on public lands.

Sen. Lisa Murkowski, released a new analysis by the Congressional Research Service of the Obama Administration’s revised proposed tax on oil, demonstrating that the slight increase in the rate actually costs an additional $8 billion over the next decade – for a total of $319 billion. When the actual budget was unveiled on February 9, the administration increased the fee to $10.25. Details of the proposal remain ambiguous. “This mathematical sleight of hand may look innocent, but that additional quarter actually raises the cost of the tax or ‘fee’ by nearly $8 billion,” Murkowski said. “Far from a rounding error, this increase would only put an additional burden on America’s oil producers, which dampens our domestic energy production.” Hiking taxes on an industry that is reeling because of low oil prices is flat out wrong. Furthermore, this tax will eventually be passed on to consumers through higher costs of energy and at the pump.

Sen. Bill Wielechowski introduced Senate Bill 188 Monday. It proposes to increase taxes on oil companies when profits rise above $20 a barrel by 0.3 percent per every additional dollar of profit beyond that amount. Wielechowski said the goal is to safeguard dividend checks by insuring that money taken in times of low oil prices will count towards dividends again in the future. “Every percent adds about $100 million for the state of Alaska so you’d have to see the price of oil go up pretty significantly before the money starts coming in,” Wielechowski explained. “Which means everyone’s making money. Instead of reaching into the same pot of money (the oil and gas industry) that is always relied upon, Headlamp suggests Sen. Wielechowski craft legislation that grows the economic pie.

 

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First Reads

Hackles raised in Juneau over analysis showing ‘new oil’ enjoys tax-free deal
Alaska Dispatch News, Alex DeMarban, February 22, 2016

Alaska export business performing at near record levels, experts say
KTUU, Steve MacDonald, February 22, 2016

Recession Already a Reality in Alaska, North Dakota, West Virginia, Wyoming
Industry Week, Steve Matthews, February 22, 2016

Anchorage lawmaker introduces bill to repay Permanent Fund earnings when used for government spending
KTVA, Liz Raines, February 22, 2016