Today’s Key Takeaways: ConocoPhillips success in the 3rd quarter generates $251 million for state coffers. Oil industry is the most productive US industry. Southcentral gas shortages are still concerning. Tight zinc market is good for Red Dog. 29 reasons to vote no on one.
NEWS OF THE DAY:
CONOCOPHILLIPS Commitment to Alaska Brings Jobs and State Revenue
In connection with ConocoPhillips’ quarterly 2024 earnings announced earlier today, ConocoPhillips Alaska reported a net income of $267 million in the third quarter of 2024.
During the quarter, ConocoPhillips Alaska incurred an estimated $341 million in taxes and royalties, which includes $251 million to the State of Alaska and $90 million to the federal government.
Additionally, in the third quarter of 2024, ConocoPhillips Alaska invested $691 million in capital.
“Continued progress on projects like Willow and Nuna, along with our agreement to acquire certain Chevron oil and gas assets in Alaska, underscores our commitment to Alaska and demonstrates the effectiveness of the stable fiscal regime,” stated Erec Isaacson, president of ConocoPhillips Alaska.
“Year to date, we’ve invested more than $2 billion in Alaska projects, which surpasses our total 2023 capital expenditures. This investment creates jobs and promotes economic opportunities for Alaskans,” Isaacson added.
Since 2007, ConocoPhillips Alaska has incurred approximately $45 billion in taxes and royalties to the State of Alaska and the federal government. Of that amount, about $35 billion went directly to the state. In that same period, ConocoPhillips Alaska’s earnings were over $27 billion.
OIL:
Oil Was Written Off. Now It’s the Most Productive US Industry
Catarina Saraiva, David Wethe, Mitchell Ferman, Kevin Crowley, Bloomberg, October 31,2024
Oil and gas extraction has seen the fastest labor productivity gains of any sector in the past decade.
In a dusty swath of sagebrush country near the Texas-New Mexico border, engineers at oil producer Matador Resources Co. encountered a problem.
Conventional wisdom called for drilling four wells into the ground and then horizontally to access layers of oil-soaked rock, a technical feat perfected by the US shale industry. But the plot of land was too narrow, limiting each well’s reach and likely making them unprofitable. So the engineers tried a novel concept: a U-turn. After boring vertically to the shale layer, they went sideways for one mile, curved the well around and then drilled back to where it began. It worked. Matador was able to pump the oil with two wells instead of four, essentially cutting costs in half.
“It’s astounding, really,” says Matador Chief Executive Officer Joseph Foran. “You give people a target, and they’ll find out better ways, better equipment, better techniques.” The U-turn, or horseshoe well, is an example of the small improvements that together have pushed oil and gas producers to the biggest labor productivity gains of any US sector over the past decade—including even tech-related industries, which have historically ranked first. The nation’s crude output has risen to a record 13.3 million barrels a day, 48% more than Saudi Arabia. All with less than a third of the rigs and far fewer workers than were needed 10 years ago.
GAS:
‘Hope is not a plan’: Potential for gas shortages still concerning to Southcentral officials
Olivia Nordyke, Alaska’s News Source, October 31, 2024
Mayors from the Southcentral region formed a coalition in December 2023 to address concerns over potential natural gas shortages. Following the first major snowfall of 2024, those concerns haven‘t gone away, and gas experts are uncertain about winter impacts.
Recent electric load shedding events have shown customers in the Southcentral region the potential to lose utility access. While officials with Chugach Electric told Alaska‘s News Source Wednesday they have no information on the cause or investigation into the load shedding, other utilities in the area were able to speak about the impact this year’s cold weather months could be impacted.
The coalition of 11 mayors, previously including former mayor Dave Bronson and now Anchorage’s current mayor Suzanne LaFrance, was formed following what members called “increasing concerns” about lack of action and policymaking regarding energy shortages. Peter Micciche, Mayor of the Kenai Peninsula and chair of the Southcentral Mayors’ Energy Coalition, said Wednesday the coalition‘s mayors represent a large portion of Alaska’s population, and those involved are not “paralyzed with politics.”
According to Micciche, the coalition is still reviewing technical information for viable solutions in what both Enstar Gas and Micciche referred to as an energy shortage. However, their foremost concern now is ensuring resource stores are full before heading into another winter season.
MINING:
Tight zinc markets good news for Alaska
Shane Lasley, North of 60 Mining News, November 1, 2024
With demand outstripping supply, price for Alaska’s highest-valued mined product sets up bright 2025 for 49th State and Red Dog.
Rising demand and a three-year-long slide in supply are pushing up the price of zinc, which is good news for zinc-producing jurisdictions like Alaska but not so much for the buyers of this galvanizing metal widely used for renewable energy and transportation infrastructure, automobiles, and a wide array of other applications.
Potential supply shortfalls and the risks that come with that weighed on the U.S. Geological Survey’s decision to add this abundant metal to the United States’ critical mineral list in 2022.
While not as exotic as gallium, rare earths, or many of the other minerals that have been deemed critical to the U.S., zinc is essential for weather-proofing the light poles, guardrails, and 5G telecommunication towers on your commute to work, as well as protecting the renewable energy infrastructure feeding low-carbon electricity into power grids.
POLITICS:
Twenty-nine paragraphs of paid sick leave
Originally posted in the Fairbanks Daily Newsminer on October 25, 2024:
To the editor: When I saw the title of Ballot Measure 1, I planned to vote for it. Then I read through it and found 29 paragraphs of sick leave regulations for employers.
As a small business owner, I have experience with one hour of paid sick leave for every 30 hours of work. It was put in place through Executive Order 13706 for federal contractors by President Obama. Bookkeeping for this is more complex than paying taxes. Keeping payroll records and providing W-2 forms at the end of each year is simple compared to keeping records of worker absences, the reasons for time off, doctors approvals for over three-day illnesses, and payments. Basically, accrual accounting for workers is needed on a monthly basis, beside the normal accounting annually for taxes.
Ballot Measure 1 is more complicated than EO13706. It increases rates at 15 workers. How will workers be counted — by the year, month, day? If we have one day where we need extra help and reach 15, what will happen to our sick leave rates? Must we avoid hiring another worker?
It appears that through most of its 29 paragraphs, the employer should limit these payments to only ill workers, but at the same time no limits or questions are allowed. Taxes are objective. Sick leave is subjective. I have no interest in being involved in a worker’s reason for taking time off. This initiative should be retitled paid time off and most of its 29 paragraphs deleted. Both EO 13706 and this initiative have circumvented the legislative process where clarifications could be made before becoming law.
For us, one hour for every 30 hours equals a 3 1/3% payroll cost increase. With payroll taxes and workers comp insurance, it is approximately 4.5%. It will be more for larger employers, and more with the cost of additional accounting included. Will current government contracts issue change orders for this cost increase? Governments and private employers should budget for the resulting inflation after the election. Will this affect the FNSB tax cap and next year’s Permanent Fund?
James McGee
Fairbanks