North Slope Projects and Production Jeopardized by HB 247

May 23, 2016 | Posted in : News

“I do not intend to offer changes to SB21,” said then candidate for Governor, Bill Walker to the Alaska Dispatch News in October of 2014. Instead of keeping his promise, Gov. Walker introduced HB 247 to kick off the 2016 legislative session. The original version of HB 247 proposed substantial changes to SB 21, which nearly 100,000 Alaskans voted to maintain in August of 2014. Revisions to the bill made by the legislature have improved the bill, but still provide uncertainty and no fiscal stability for projects.

We at Headlamp believe it is important for Alaskans to understand how HB 247 threatens production from projects already sanctioned, and projects under consideration (exploration phase) with the potential to add considerable amounts of new production. The map below from the Alaska Department of Natural Resources (DOR) Division of Oil and Gas shows industry activity in the North Slope basin as of May, 2016.


The following North Slope projects are threatened by HB 247:

  • Smith Bay, Caelus Energy Alaska: Caelus announced May 20, 2016 in Petroleum News that their find is “a very giant oil field over there” and may represent a “1 billion barrel opportunity.”
  • Oooguruk/Nuna, Caelus Energy Alaska: Nuna is an off-shore development from the Oooguruk unit and will cost Caelus over $1 billion to develop. Production would start at 10,000 barrels daily, with peak production ranging from 20,000 to 25,000 barrels per day.
  • Mustang Development, Brooks Range Petroleum: Project cost to exceed $500 million. Represens t the key to future development west of Kuparuk. Peak production 12,000 to 15,000 barrels per day.
  • Pikka/Nanushuk development, Repsol-Armstrong: Massive multi-billion-barrel field. Possibly the biggest discovery since Prudhoe Bay. Cost to develop will be in the billions of dollars. Peak production estimated by Armstrong and former DNR Commissioner Meyers to range between 120,000 to 250,000 barrels per day.
  • Icewine development, Accumulate Energy Alaska/88 Energy/Burgundy Xploration: Conducting seismic work. Shale play. Estimated deposit of 492 million barrels. Current seismic/exploration drilling cost: $60-75 million.

Total production at risk: 150,000 to 290,000 barrels per day (for projects that have given production estimates). If Smith Bay and Icewine come online, production levels would increase dramatically.

Final takeaway: HB 247 is still bad policy. Incentives impact investment; investment impacts production; increased production is good for all Alaskans.

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Morning Headlamp — To Another Special Session We Go

May 23, 2016 | Posted in : News

Walker’s Special day. Today, Gov. Bill Walker and the legislature will enter into a special session after failing to reach agreements on a number of issues. The bulk of the work however, is wrapping up discussions on the state’s budget. After the first day of the Legislature’s extended session on April 18, after the statutory 90-day limit had passed but before the more potent constitutional limit of 121 days had arrived, senators held no finance or other standing committee meetings until May 11. It was only then that they resumed their public work on the capital budget — all while members collected $213 a day for living expenses.

Low oil prices = no work for Alaskans. The number of former oil and gas workers collecting jobless benefits from the state rose in April, though claims in all industries remain at relatively low levels, a state economist said on Friday. The number of claimants in the oil and gas industry, which has been slammed by a long stretch of low oil prices, rose to 1,467 in April. That’s up from the 1,277 who collected checks from the state in March, said Lennon Weller, an economist with the state Labor Department. Headlamp is worried that this is just the start of widespread unemployment in Alaska’s largest industry.

Regulators say a federal agency violated the rules when its contractor failed to properly abandon two wells last winter during the cleanup of a decades-old environmental mess in the National Petroleum Reserve-Alaska. The missteps occurred as part of the U.S. Bureau of Land Management’s $50 million project to clean up old well sites abandoned long ago by the federal government. The government undertook the drilling efforts to explore the hydrocarbon potential of its 23-million acre reserve. The attention generated by the outcry helped lead to this latest round of cleanups after U.S. Sen. Lisa Murkowski secured federal funding for the effort in the Helium Stewardship Act of 2013. Jon Ealy, chief operating officer at Marsh Creek, said the work associated with remediating the two wells and many others as part of the project is challenging. “We did an excellent job in all but two parts,” he said. “We take a lot of pride in our performance up there, and this is not something we’re used to and not something we’re comfortable with.” Headlamp is trying to imagine if anyone outside of the federal government would say “we did a great job, mostly…”

War of words. Alaska’s senior Senator Lisa Murkowski criticized the Interior Department in a hearing Thursday over a tweet promoting a meeting with Alaska Natives who are opposed to drilling in the Arctic, arguing that they do not represent the true opinions of most Alaskans. The group met with officials from the Bureau of Ocean Energy Management — a visit memorialized with a tweet that riled Murkowski. The tweet, posted Wednesday, shows the visitors from Point Lay and BOEM Director Abigail Ross Hopper, who testified before Murkowski’s committee Thursday, and indicated they had met to discuss the villagers’ opposition to Arctic drilling. Murkowski, worried that BOEM may take further steps to limit Arctic drilling, argued that the tweet revealed the true intentions at the department. “I looked at [the tweet] and it doesn’t necessarily show me that there’s impartiality within BOEM.”


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First Reads

Oil and gas jobless claims reach new high in April
Alaska Dispatch News, Alex DaMarban, May 21, 2016

Alaska lawmakers staring down government shutdown after session ends in disarray and defeat
Alaska Dispatch News, Nathaniel Herz, May 20, 2016

Murkowski slams attention given to anti-Arctic drilling activists
Alaska Dispatch News, Erica Martinson, May 21, 2016 Lidji

State regulators hammer BLM for violations in legacy-well cleanup
Alaska Dispatch News, Alex DeMarban, May 22, 2016

S&P sees impact if Alaska unable to reach budget deal in special session
Rueters, Rory Carrol, May 19, 2016

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Friday’s Fast Five

May 20, 2016 | Posted in : News

Headlamp wants our followers to always be up to date with the developments in Alaska’s economy, politics, and industry. Check out this week’s rundown of the stories affecting you.

Top Story of the Week

This week, revised versions of Governor Walker’s HB 247 were approved by both houses. Despite technically being the same bill, House Bill 247 that passed the House May 13 is vastly different than the version of HB 247 that passed the Senate by a 14-6 vote on May 18, the last day of the session allowed under the state Constitution. Governor Walker also called a special session to solve the state’s ongoing budget crisis.

Top Reads of the Week

Alaska Legislature adjourns with work still to do, called back by Gov. Walker
Alaska Dispatch News, Nathaniel Herz, May 18, 2016
Alaska lawmakers failed Wednesday to broker a last-minute deal on the state budget or oil taxes and adjourned their regular session after 121 days — leaving a spending plan and deficit-reduction legislation for a special session called immediately by Gov. Bill Walker for Monday in Juneau.

AJOC EDITORIAL: Money for nothing and the checks for free
Alaska Journal of Commerce, Andrew Jensen, May 18, 2016
With apologies to Dire Straits, the demagogues in the Democrat ranks are back in their comfort zone after dismantling oil and gas tax credits they once championed under ACES by winning over enough squishes among a Republican-led Majority that now exists in name only.

S&P notices lack of budget fix
Alaska Journal of Commerce, DJ Summers, May 19, 2016
Credit ratings agency Standard & Poor’s released a statement on May 19 warning the Legislature once again that a failure to address the $4 billion budget gap may further lower Alaska’s credit rating.

Quote of the Week

“Amnesia can be very convenient. But don’t Alaskans deserve the facts?”Sen. Cathy Giessel, R-Anchorage

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Morning Headlamp — S&P issues warning to Alaska

May 20, 2016 | Posted in : News

S&P connects the dots where AK lawmakers cannot. Failure to address the $4 billion budget gap may further lower Alaska’s credit rating said ratings agency Standard & Poor’s in a statement yesterday. “The politics of reaching an agreement on some combination of fiscal reforms that would stabilize the state’s budget outlook is proving every bit as difficult as we anticipated in January,” the statement reads. “If lawmakers cannot reach an agreement on fiscal reforms that move the state toward fiscal alignment in the special session, we expect the negative pressure on the state’s credit rating could intensify.” The statement also notes that as prodigious as the state’s base of investment assets is, it most likely cannot sustainably generate enough revenue from investments to support the current level of general fund expenditures.” Headlamp would wager a bet that inflicting an aggressive tax regime on a massive, and hurting, industry has something to do with this as well.

Alaska’s seasonally adjusted unemployment rate was 6.6 percent in April, unchanged from the previous month. The comparable U.S. rate was 5.0 percent. Preliminary estimates of Alaska’s April job count show a loss of 2,500 jobs from the same month in 2015, driven by large declines in oil and gas industry and state government employment. Employment levels in the construction and professional and business services sectors also shrank, likely due to oil-related cuts.  Losses were partially offset by job growth in the health care and retail sectors. Headlamp would note that employment in the oil and gas industry decreased another 100 jobs from March to April this year according to the Department of Labor’s most recent numbers. Since employment in Alaska’s oil and gas industry peaked in March of 2015 at 14,800, 2,400 jobs have been lost. That is more than $350 million in wages taken out of our economy.  We ask policy makers again: how will raising taxes on the industry help increase production and get thousands of hard working Alaskans re-employed?

Dermot Cole penned a commentary in the Alaska Dispatch News where he advised readers to not “squeal” in opposition to Gov. Walker’s oil and gas tax bill. Cole writes that, “The loudest opposition, and that which legislators paid the most attention to, came from the oil industry, winner of the “woe is me” award.” Headlamp is curious if Cole would say this to one of the thousands of industry workers who have been laid off. Commentators like Cole fail to recognize the raw human element at the center of bad policies, like Gov. Walker’s tax increase on the industry, that will lead directly to further job loss. Where is Cole’s compassion for the thousands of Alaskans who have lost their jobs during this oil slump? Will he write a column on the hardships thousands of families are going through as a result of losing their job in Alaska’s highest paying industry?   

“Our community is empowered by oil and gas,” testified Wainwright mayor John Hopson Jr. “As Wainwright’s mayor, I support retaining the Arctic lease sales in the proposed program and remain committed to working with BOEM to ensure that future leases are developed in a way that protects our communities and environment.” Hopson spoke at the Senate Energy and Natural Resources Committee hearing on the Bureau of Ocean Energy Management’s proposed 2017-22 offshore drilling plan.  Hundreds of communities rely on the economic power of responsible resource development, Headlamp applauds Hopson reminding the federal government of that.


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First Reads

Alaska lawmakers staring down government shutdown after session ends in disarray and defeat
Alaska Dispatch News, Nathaniel Herz, May 19, 2016

S&P notices lack of budget fix
Alaska Journal of Commerce, DJ Summers, May 19, 2016

Oil tax credit plan doesn’t deserve this level of squealing
Alaska Dispatch News, Dermot Cole, May 19, 2016

Do Arctic villages need oil? Point Lay leaders say no
Alaska Dispatch News, Nathaniel Herz, May 18, 2016

A November 2017 startup
Petroleum News, Alan Bailey

The Explorers 2016: Doyon drilling third Nenana well this summer
Alaska Dispatch News, Eric Lidji

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Morning Headlamp — Tax credits and special session: AK lawmakers’ long night

May 19, 2016 | Posted in : News

The Alaska Senate passed legislation that would phase out credits and impose a tax on Cook Inlet oil production. The measure does not go as far as the House version in addressing North Slope credits.

Hours later, the Alaska House rejected the Senate rewrite of the oil and gas tax credit bill. Minority Democrats sought resolution on oil and gas tax credit legislation and said they’d prefer to go to a special session, focused on a select number of issues. Somehow, Headlamp isn’t surprised by the legislative hypocrisy that has become commonplace this session—we’d rather focus on the thousands of Alaskan families that are now directly at risk as the state’s primary industry will be belabored for the foreseeable future.

The Alaska Journal of Commerce ran a brilliant editorial about the Governor and Alaskan legislators following the approval of tax credit reductions for oil and gas producers. According to managing editor Andrew Jensen, “Alaska has a new House majority full of Garas and Guttenbergs that are apparently capable of coming up with an endless series of convoluted matrices of tax levers creeping ever upward but who can’t or won’t read the daily production report from the Department of RevenueIt is patently dishonest for Democrats and Walker (but I repeat myself) to continually assert that the state is losing money from oil tax credits when the state is taking in more than a billion dollars this fiscal year.” Headlamp commends Jensen, again, for his apt analysis and wonders if Alaskans are aware that the Governor is providing incorrect information about the impact of oil and gas tax credits.

Nothing special of note. Yesterday marked the 121st day of the regular legislative session prompting Governor Walker to immediately call a special session to being Monday in Juneau. “Feel a little defeated and unfortunate, because Alaskans are the ones that are really going to suffer if we don’t get a budget passed,” said House Majority Leader Charisse Millett. The Legislature’s failure to produce a budget means that state workers are still set to receive layoff warnings in early June, just like they did last year, with the Governor claiming that 10,000 employees could be laid off…it didn’t happen then, it won’t happen now. Unfortunately, the difference between last year and this year is the layoff of thousands of people in the oil and gas industry. Bills on the special session agenda include the budget, oil and gas tax credits, a proposal to allow for structured annual draws from Alaska Permanent Fund earnings and many taxes.

Treasury Secretary Lew spent Wednesday morning in Anchorage in meetings with Mayor Ethan Berkowitz, Lt. Gov. Byron Mallott, and representatives from Alaska banks, oil companies, Alaska Native corporations, nonprofits and other organizations. They talked about issues surrounding economic diversification and financial inclusion — that is, making sure Alaskans have access to financial services such as checking or retirement savings accounts, and that people know about opportunities for starting businesses. “There’s a lot of people out there who have a lot of good ideas, who are willing to work hard, grow businesses, take risks,” he said. “Those are the people we need to get more engaged in the economy. Connecting budding capitalists with capital is a critical piece of making sure that an economy prospers.” Headlamp is sorry to inform Secretary Lew that the aforementioned capital is going to be hard to come by in Alaska due to recent legislation.

Everyone has to live within their means. State lawmakers cut education funding in the proposed budgets by nearly $13 million Tuesday night. They moved the money into the oil and gas tax credit fund. Legislative Finance Division Director David Teal said in the House budget, the government was going to use $145 million leftover money from fiscal year 2016 to pay for education. But during the conference committee meeting, they decided not to. “They put it into the oil and gas tax credit fund instead,” Teal said during a phone interview. Senate Majority spokesperson Michaela Goertzen wrote in an email that the conference committee chose not to fund the increase (to the Base Student Allocation) because it “was approved under vastly different budget conditions. … Given the current state budget deficit, we are not in a position to continue the increase for FY17.” Anchorage School Board member Tam Agosti-Gissler said the district estimates they will have to trim $4.6 million from the Anchorage School District budget if the legislature keeps these cuts. She said she doesn’t know how they would make up for the loss. For FY16/17 the Anchorage School District has a total budget of $816,513,000. Headlamp questions the ‘sky is falling’ rhetoric used by Mrs. Gissler to describe a paltry $4.3 million reduction in state funding for the ASD. We’d suggest Mrs. Gissler and the ASD follow the lead of the Fairbanks North Star Borough (FNSB) school district. FNSB Superintendent Karen Gaborik said she plans to provide the board with a list of potential cuts, organized into priority levels, by Friday. She said the cuts at the top of her list of recommendations include things like leaving certain administrative positions unfilled, scaling back phone system upgrades and reducing curriculum materials funding.


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First Reads

Alaska Legislature adjourns with work still to do, called back by Gov. Walker
Alaska Dispatch News, Nathaniel Herz, May 18, 2016

Alaska House leaders losing grip over rank-and-file, complicating finale in Juneau
Alaska Dispatch News, Nathaniel Herz, May 18, 2016

The Latest: Alaska governor calls special session
Associated Press, Becky Bohrer, May 18, 2016

U.S. Treasury Secretary talks finance and economic diversity in Alaska
Alaska Dispatch News, Annie Zak, May 18, 2016

Showdown set over oil tax credit bills
Alaska Journal of Commerce, Elwood Brehmer, May 18, 2016

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The final chapter in the 2016 oil and gas tax debacle?

May 18, 2016 | Posted in : News

Day 121 of the Alaska Legislative Session will be remembered as a gloomy day for the Last Frontier’s oil and gas industry.  In roughly 24 hours the Senate introduced and passed their version of HB 247, which makes substantial changes to Alaska’s oil and gas tax credit regime, without any public testimony and without hearing any input from industry or Alaska businesses who will be greatly impacted by this piece of legislation which will not help increase production.

What you need to know:

  • Senators who wholeheartedly voted for SB 21 in 2013, just voted for HB 247 which raises taxes, increases uncertainty, and threatens the livelihoods of small Alaskan businesses.
  • Senators who supported SB 21, and today voted for HB 247 are: Senator Bishop, Coghill, Dunleavy, MacKinnon, Giessel, Huggins, Kelly, Meyer, and Micciche. We applaud Sen. Stoltze and Sen. McGuire for voting no on HB 247. It’s worth noting that both Senators are not running for re-election and were the only members of the Majority to oppose this tax increase
  • HB 247, in its most egregious form (the Governor’s original bill) was only projected to save the state between $200-300 million in FY17.
  • The version that just passed the Senate will only save the state $5-10 million in FY17.
  • Claims that HB 247 in its original form would reduce the budget deficit by $775 million this year are blatantly false.
  • Even at low oil prices the industry still pays for 50-65% of Alaska’s budget

Immediately following the Senate floor vote, Gavel to Gavel ran the press conference from March 20, 2013, after SB 21 passed.  The Senators mentioned above were all thrilled at their votes to lower taxes and increase investment and production.

What happened?


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Morning Headlamp – Senate Finance Committee keeps tax credits intact

May 18, 2016 | Posted in : News

Senate revises House bill – Cook Inlet still loses. According to the Alaska Dispatch News, yesterday the Alaska Senate dismantled the oil tax bill passed by the House last week, offering a substitute that accepts a pair of significant House provisions but eliminates its North Slope tax increase aimed at big producers. The revised version of House Bill 247 was unveiled at a Tuesday morning hearing by Republican co-chair Anna MacKinnon and. The Senate Finance Committee’s revisions only have a total budget impact of $10 million on the FY 17 budget.

“Amnesia can be very convenient.” Sen. Cathy Giessel penned a commentary in the Alaska Dispatch News asking for Alaskans to “exercise patience, discipline and work with a long-term vision” in the oil tax debate. Giessel highlighted the fact that “Oil has paid nearly every bill and seeded our Permanent Fund for decades. Naysayers focus on production taxes, and overlook the state’s royalty take: one of every eight barrels of oil goes straight to the state, before any tax or credit calculations even take place.” Finally, Giessel reminded readers that many of the very same voices decrying credits today, voted “yes” just yesterday.” Headlamp applauds the Senator for her continued support of Alaska’s oil and gas industry. Like Headlamp, the Senator stresses the fact that lawmakers are acting irrationally in the face of a macroeconomic trend.

With the downturn in oil prices taking its toll, former oil company employees and related service companies are actively out hunting for work. About 4.2 percent of Alaska’s population worked in oil and gas jobs in 2015, according to an April 2016 report from the Alaska Department of Labor and Workforce Development. The department expects there to be about 1,000 fewer jobs in oil and gas from month to month in 2016 than in 2015, according to the January 2016 job forecast. Those projections are already low. According to DOL’s own numbers, from March 2015 to March 2016, employment in the oil and gas industry is down 2,300 jobs. “Everybody’s truly a support company for oil, gas, and mining,” Rebecca Logan of the Alaska Support Industry Alliance said. “We have drillers, but we also have hotels, graphics companies…You’d be hard pressed to find a company that isn’t supporting the oil and gas industry in some way.” When will lawmakers understand the gravity of their actions? Policies that hurt the oil and gas industry hurt Alaskans everywhere.

Alaskan lawmakers hit the 121-day constitutional deadline today, they now have two options: They can adjourn, and wait for Walker to call a special session with a limited agenda, which he’s said he wants in Juneau. Or they can extend their session for up to 10 days. Stick with Headlamp for the latest.


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First Reads

New Senate oil tax proposal preserves key tax break for big companies
Alaska Dispatch News, Nathaniel Herz, May 17, 2016

It’s oil tax debate season in Alaska, but let’s do it right
Alaska Dispatch News, Sen. Cathy Giessel, May 17, 2016

Support industries feel oil market contraction
Peninsula Clarion, Elizabeth Earl, May 17, 2016

Alaska Legislature approaches Wednesday deadline with most of its work still incomplete
Alaska Dispatch News, Nathaniel Herz, May 17, 2016


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Headlamp Extra Edition: A Walk Down Memory Lane

May 17, 2016 | Posted in : News

Today, Headlamp would like to indulge our readers with a brief history lesson. For as the saying goes, those who do not learn history are doomed to repeat it. Let’s harken back to a time when our Legislature and Governor understood the importance of Alaska’s oil and gas industry, and actually wanted to create an environment where both the industry and Alaskans could successfully thrive.

Make no mistake, Headlamp is not speaking about forgone eras, but in fact recent history! The year was 2013, and after years of declining oil production under the highly progressive tax regime ACES, Gov. Parnell and the Legislature recognized that change was desperately needed if Alaska was to have a bright economic future.

After hearing from industry officials, support company leaders, expert oil and gas consultants, and the public, Alaska policy makers crafted and passed SB 21 to increase production, attract more investment, spur job growth, generate new revenues for both state and local government, and create an overall thriving private sector. SB 21 originally passed the Alaska State Senate by a vote of 11-9, and then passed 12-8 after the House had amended it. The Alaska House of Representatives passed SB 21 by a vote of 24-15, on reconsideration it passed 27-12. A year later nearly 100,000 Alaskans voted NO on Ballot Measure One and upheld SB 21 as the law of the land.

What is most relevant for today’s discussion is that, during a time of economic downturn, when thousands of Alaskans have lost their jobs due to low oil prices, a number of legislators who voted for SB 21 just voted for HB 247 to substantively change SB 21 and increase taxes on Alaska’s oil and gas industry. The legislators who voted for SB 21 (legislation meant to attract investment, increase production, create more jobs, and keep Alaska competitive), and who just voted for HB 247 (legislation that will deter investment, decrease production, kill more  jobs, chase companies away, and make Alaska an unattractive place to do business) are as follows: Rep. Gabrielle LeDoux, Rep. Charisse Millett, Rep. Lynn Gattis, Rep. Mark Neuman, Rep. Steve Thompson, and Rep. Tammie Wilson. Rep. Seaton and Rep. Munoz voted against SB 21, but on reconsideration switched their votes in favor of it. They both adamantly supported and voted for HB 247.

Senators still in office who voted for SB 21 are: Sen. Bishop, Coghill, Dunleavy, Fairclough (now MacKinnon), Giessel, Huggins, Kelly, McGuire, Meyer, and Micciche. Sen. Olson joined that group and voted for the final version of SB 21 that was sent to the Governor.

Headlamp was encouraged to hear the members of Senate Finance express extreme concern about the impact of HB 247 on Alaska’s economy. With potentially just one day left in the session, we hope the Senate will confirm their support of SB 21 and Alaska’s economy and leave the tax system we have in place. 

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Morning Headlamp — Governor Walker laments budget inaction, blames lack of capital investment

May 17, 2016 | Posted in : News

Gov. Walker needs to connect the dots. Tomorrow is the last day of the extended legislative session and Alaska still doesn’t have a budget for the fiscal year which begins in July. In the face of legislative inaction, Governor Bill Walker penned an op-ed in the Fairbanks Daily News Miner lamenting the failure to reach consensus. According to Gov. Walker, “We have only about one-fifth of the revenue we need to balance the budget. And that’s after several years of budget cuts and almost no capital investment…Bond rating agencies have told us they will further downgrade Alaska’s credit rating if lawmakers do not take action this year to fix our systemic budget imbalance. A lower bond rating increases the cost of many public projects, and sends a chilling signal to private investors.”

Does the Governor not see the innate connection between capital investment, bond ratings, and aggressive tax policy? Headlamp is sorry that the Governor is frustrated but Alaska’s fiscal problems are a direct result of bad policy.

Alaska wants information the big three producers are not willing to hand over about potential North Slope natural gas sales. Alaska Division of Oil and Gas Director Corri Feige sent a letter to BP Alaska management May 12 reiterating that the 2016 Plan of Development for the Prudhoe Bay will be considered incomplete until the company shares “specific information” regarding its efforts to market North Slope gas in preparation for a gasline project. The May 12 letter is the latest correspondence in a back-and-forth between the producers and the state that dates back to early in the year. “In order to adequately evaluate how the (Prudhoe Bay Plan of Development) meets the requirements of (state regulations) and other law, the division needs specific information regarding past and on-going efforts to market gas in both the local and non-local markets,” Feige wrote in the May 12 letter. ExxonMobil has not responded to the division, a fact noted in Feige’s May 12 letter. An ExxonMobil Alaska spokesperson has told the Alaska Journal of Commerce the company would defer to BP as the unit operator on the issue.

The Alaska Senate has voted 16-4 to send the state’s $1.6 billion capital construction budget to the House. The $1.6 billion budget is in many ways a bare-bones appropriation with less than $100 million coming from the state and the rest being paid by the federal government.


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First Reads

Time to act on state budget gap is now
Fairbanks Daily News Miner, Governor Bill Walker, May 17, 2016

Senate adopts austere capital budget
Alaska Public Radio News, Jeremy Hsieh, May 16, 2016

Passage of state fiscal budget held up by Legislature
Alaska Public Radio News, Lori Townsend, May 16, 2016

Stalemate between state, producers continues over Prudhoe plan
Alaska Journal of Commerce, Elwood Brehmer, May 16, 2016

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Morning Headlamp — Tax credits get cold reception in AK Senate

May 16, 2016 | Posted in : News

OIL TAX ENDGAME? House sends oil tax package to the Senate. Friday saw the passage of a “wide-ranging” oil tax bill in the House aimed drastically changing the current system with minimal financial impact on the FY 17 budget. The passage of House Bill 247, by a vote of 25 to 12, despite opposition from House Speaker Mike Chenault and one of his allies in the Republican leadership, Anchorage Rep. Craig Johnson. “Pretty easy to say that it’s a pretty dramatic shift in oil tax policy, and without a doubt it will result in less production from Cook Inlet to the North Slope” said Alaska Oil and Gas Association President Kara Moriarty. Rep. Dan Saddler quoted one of the Legislature’s oil and gas consultants, Janak Mayer of enalytica, in criticizing the proposal to change the loss-based credits. “While I’m not aware of any such tax regime existing elsewhere in the world, one certainly couldn’t imagine a system better designed to discourage reinvestment and encourage harvest and rapid decline,” Mayer wrote. Headlamp wakes up to a rougher-than-normal Monday as a regressive tax policy passed through the House with support from the co-chairs of House Finance and the House Majority Leader—all of whom voted for SB21 and opposed the referendum to repeal it. Any lawmaker who thinks this bill is in the best interest of all Alaskans is seriously out of touch with macroeconomic realities.

Chilly welcome for oil tax bill in Senate. House Bill 247 “landed with a thud” at the Senate Finance Committee, where its two co-chairs said they feared the bill’s long-term cost to the state in jobs and oil production would exceed its short-term potential to generate cash. The Senate has at least two options with HB 247. It could simply vote it down and start over in a special session. Or it could pass an amended version and hash out the differences with the House in a conference committee convened for that purpose. Stick with Headlamp as we cover any legislative developments to HB247.

Despite Shell’s recent cancelation of Arctic offshore exploration, the region continues as a world-class, relatively unexplored petroleum province. “It’s rare to find a basin where so much comes together,” U.S. Bureau of Ocean Energy Management geologist Kirk Sherwood told Petroleum News. Headlamp hopes that Alaskan legislators can also recognize the untapped potential Alaska has at its disposal.


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First Reads

Weary Alaska House breaks through oil tax gridlock, passes bill to Senate
Alaska Dispatch News, Nathaniel Herz, May 13, 2016

Oil-tax bill that passed Alaska House gets a chilly welcome in the Senate
Alaska Dispatch News, Nathaniel Herz, May 14, 2016

Despite recent oil company departures, the Chukchi Sea still holds potential for major finds
Petroleum News, Alan Bailey, May 14, 2016

Job Corps Student Finds Opportunity North of the Arctic Circle
U.S. Department of Labor, Barbara Hunt, May 12, 2016

Beautiful Oil Data
Seeking Alpha, Daniel Jones, May 16, 2016

Exxon hopes Point Thomson is down payment on a gas line
KTOO, Rachel Waldholz, May 15, 2016

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