Today’s Key Takeaways: AK Senate oil tax hearing produces caution and production increases. A view of AKLNG from Houston. Former DNR Commissioner Feige joins Alaska Energy Metals board. Senate tax bill threatens community investment.
NEWS OF THE DAY:
Senate Finance Committee hearing on Oil Taxes
DOR: “The revenue impact of the newly added provision related to oil and gas entities, is highly uncertain, as the Department does not have detailed financial information for the companies that would be impacted. Further, the revenue impact would likely be concentrated in a small number of companies. “
Our Take: Beware of legislators promising hundreds of millions of dollars in new revenue.
Gaffney Cline (State’s Oil and Gas Consultant):
- Alaska oil & gas faces may challenges going forward but it remains an attractive and competitive oil & gas province
- Going forward tax revenues appear reliant upon new oil and gas developments.
- Proposed tax changes will likely not lead to material reduction of existing production
- The purely financial impact of the proposed tax change is expected to have limited impact on current opportunities/investments.
- There is a downside risk if the tax change discourages substantial new developments as the state revenue lost may be materially greater than increment tax generated from existing production.
Our Take: Beware of legislators promising hundreds of millions of dollars in new revenue and no impact on future investment.
Hilcorp – A picture worth 1000 words:
Our Take: Hats off to Hilcorp for their production increases!
GAS:
The Alaskan gambit: $44 billion LNG project decades in the making
James Osborne, The Houston Chronicle, May 8, 2023
Oil companies have for decades pulled billions of dollars of natural gas from Alaska’s rugged North Slope, only to pump it back underground once it’s been separated from the crude oil they are seeking.
More than 800 miles from the closest ice-free port accessible to ships, the North Slope has no natural gas pipeline and thus no market for companies such as Exxon Mobil and Conoco Phillips to sell their gas into.
Now a planned $44 billion project that would pipe gas the length of Alaska to an LNG terminal outside Anchorage stands to change all that as state officials, with the support of the Biden administration, seek to breathe new life into the state’s declining oil and gas industry by shipping the gas across the northern Pacific to South Korea and Japan.
State-owned corporation asks for $5.6 million to keep Alaska gas pipeline quest alive
James Brooks, Alaska Beacon, May 6, 2023
Alaska’s quest to build a gas pipeline from the North Slope to its southern shore needs additional cash from the state treasury, the president of the state-owned Alaska Gasline Development Corp. said this week.
In a pair of hearings at the state Capitol, corporation President Frank Richards asked state lawmakers for $3.1 million in funding.
Without the money, he said, the corporation will shut down.
“If the budget does not include this, then yes, we will move out of their offices and we will be laying off our people and putting our projects in boxes,” Richards told the House Finance Committee.
The money is in the budget proposed by the House but is not yet in the one proposed by the Senate.
Sen. Bert Stedman, R-Sitka, said on Friday that the corporation will get its money, and there are no plans to defund the agency.
MINING:
Feige joins Alaska Energy Metals board
Shane Lasley, North of 60 Mining News, May 5, 2023
Alaska Energy Metals Corp. May 2 announced the appointment of former Alaska Department of Natural Resources Commissioner Corri Feige to its board of directors.
“We are really pleased to have Corri join our company! She has great energy, vision, and leadership skills, but, most importantly, she has boundless enthusiasm for resource-centered economic development in Alaska. Her enthusiasm is infectious!” said Alaska Energy Metal’s President and CEO Gregory Beischer.
Formerly known as Millrock Resources Inc., Alaska Energy Metals is focused on the exploration and development of a large nickel-copper-cobalt-chrome-iron-platinum group metals deposit on its Nikolai project near the paved Richardson Highway about a 2.5-hour drive south of the city of Fairbanks, Alaska.
POLITICS:
Senate tax bills threaten critically needed community investment
Rob Urbach, The Frontiersman, May 4, 2023
From my view as the CEO of the Iditarod organization, Hilcorp Alaska’s role as a major sponsor of our race is a source of great pride. Their partnership and support are integral to keeping the Last Great Race® alive and well. It concerns me when I see pieces of legislation, like Senate Bill 114 and Senate Bill 122, which clearly targets companies like Hilcorp, even when its negative consequences are entirely predictable.
Longtime Alaskans are familiar with how massive, multinational oil companies supported many nonprofits and local charities for years. While many of the bigger companies have packed up and left, Alaska has been fortunate to attract new, independent oil and gas companies to keep oil flowing down the pipeline. When we consider Senate Bill 114 and Senate Bill 122, it’s important to consider that there are key differences between larger, legacy oil and gas companies and smaller ones like Hilcorp. When we target smaller players with legislation, like Senate Bill 114 and Senate Bill 122, that increases their taxes by over 75%, we significantly increase the challenges of their ability to work in Alaska.
Hilcorp Alaska is privately owned and, therefore, less susceptible to pressure from outside activist groups. This approach allows smaller companies to align with Alaskans’ long-term interests because they have formed strong connections with the communities they operate in. I can’t tell you how refreshing it is to work with a sponsor like Hilcorp that realizes such activists do not represent the attitudes of Alaskans and proudly continues to support a beloved Alaska tradition like the Iditarod. They know enough about Alaska to understand that local support is critical to their success.
It is important to note that companies like Hilcorp are not just important sponsors of the Iditarod, but also major contributors to our communities. They provide good jobs, support many local businesses, and help fund community initiatives. If Senate Bill 114 or Senate Bill 122 became law, it could force a pullback, meaning the company’s spending in Alaska would shrink. This reduction in local spending would ripple throughout the private and public sectors. With our state economy still struggling in this post-Covid world, the timing of these pieces of legislation could not be worse.
Alaska’s economy remains heavily dependent on resource development, and we need companies like Hilcorp to continue spending money in our state. Increased corporate taxes threatens future community investment by moving more of their available dollars to paying higher taxes. These pieces of legislation offer a stark choice: more money to fund the government now, or more money to invest locally in the long term.
Alaska is fortunate to be home to corporate sponsors who understand what it means to be a real partner. Companies like Hilcorp Alaska represent the future of what resource development companies will look like in our state: smaller, more nimble, and less prone to worry about how they do it in the lower 48. Our state laws and regulations should welcome them, not chase them off. Senate Bill 114 and Senate Bill 122 should be summarily rejected by state leaders who understand this.