Morning Headlamp — Walker is still hoping for a tax credit “bomb.”

Alaska Public Radio News covered Gov. Walker and Alaska Oil and Gas Association’s diverging plans for Alaska’s oil and gas industry. While Walker would like to see the tax credits scaled back more quickly, that doesn’t mean the bill satisfies industry’s concerns. Alaska Oil and Gas Association President and CEO Kara Moriarty said scaling back tax credits will discourage oil and gas companies from investing in the state. The new version also would eliminate tax credits in Cook Inlet, but at a slower pace than the Senate bill, which Moriarty described as “still a bomb.” “We don’t want to be in a situation where we’re pitting…producers against the independents, those that are coming in on the exploration side,” Walker said. The only parties ‘pitted against’ each other are the lawmakers who support removing tax credits and Alaskans who support a strong oil and gas industry and a strong Alaska economy, it’s as simple as that.

Because you asked…According to BP’s Prudhoe Bay development plan, projects in the reduced drilling time — 3.8 rig years in 2015 to 1.6 rig years in 2016 — will result in a production decline of 20,000 barrels to nearly 60,000 barrels of oil per day from the Prudhoe Bay field. Well workover activity will be cut as well, from 27 workovers in 2015 to just 4 this year. The preliminary spring forecast released March 21 projected daily North Slope production to average 517,700 barrels per day in fiscal year 2016 and 507,100 barrels per day in 2017. The revised April 7 forecast increased expected 2016 production to 520,200 barrels per day and kept the 2017 forecast at 507,100 barrels. Slow progress or no progress is the question legislators and the Governor should ask and answer as they consider more taxes on an industry that is already hurting due to low commodity prices. 

5 and counting. The House Rules Committee attempted to reconcile various opinions on Gov. Walker’s tax credit bill when Rules chair Rep. Craig Johnson, released the latest iteration of House Bill 247 on April 26, day 99 of the 90-day session. The Rules bill makes the most drastic cuts to the credit program of the various versions of the legislation introduced in committees, but the phase out is over a longer period of time. It could save and generate up to $365 million annually by fiscal year 2021, according to a Department of Revenue analysis

ConocoPhillips again reduced its 2016 capital spending plans as low commodities prices continue to take a toll on the energy sector. ConocoPhillips cut its 2016 capital spending budget to $5.7 billion, from February’s lowered estimate of $6.4 billion. In its earnings release Thursday, ConocoPhillips said the lower guidance was mostly driven by reduced deep water exploration activity, deferrals and lower costs across the portfolio.  Alaska is lucky that Conoco is increasing activity, investment and production in Alaska. 

 

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First Reads

Walker, industry leader have separate concerns on oil, gas bill
Alaska Public Radio News, Andrew Kitchenman, April 27, 2016

State wants gas sale info for Prudhoe plan; owners estimate 20K-60K barrel decline
Alaska Journal of Commerce, Elwood Brehmer, April 27, 2016

ConocoPhillips Further Reduces Spending Plans, Swings to Big Loss
Wall Street Journal, Tess Stynes, April 28, 2016

Tax credit rewrite hits fifth iteration amid impasse
Alaska Journal of Commerce, Elwood Brehmer, April 27, 2016

Governor takes income tax off table, prepares for special session
KTVA, Liz Raines, April 27, 2016

COMMENTARY: Reinbold’s budget analysis omits critical information
Alaska Journal of Commerce, Paul Fuhs, April 27, 2016