This week is the anniversary of Governor Jay Hammond’s (NGP Photo) historic, non-partisan news conference in 1981 which produced a ‘fair share’ oil and gas tax plan.  It was a roughly one-third split of Prudhoe Bay’s economic rent (i.e. royalty, severance tax, property tax, state and federal income tax) among the Federal Government (36%), Producers (34%) and State Government (30%).  The legislation made the oil income tax non-discriminatory, increased the severance tax and repealed the personal income tax on citizens–among other things.  While listeners will identify no love lost for producing companies, they will find it noteworthy that the press conference followed a decade of annual industry tax increases and preceeded roughly two decades of tax stability and massive, additional Alaska oil and gas investments.  Tax increases during the last decade have dramatically raised Alaska’s ‘take’ from Prudhoe Bay at the expense of producers. This trend comes at a time when without more producer investment the Trans Alaska Pipeline will surely cease operations in a few years.  Based on testimony from the TAPS CEO (See last weekend story below), that shutdown could occur in a few years–absent increased oil production and pipeline throughput–or any day in response to mechanical problems.  In this webpage we have extensively reported on how the Federal government’s hostile oil and gas policy has also contributed to a threatened shutdown of TAPS.   -dh

1.  Today: The ADN Op-Ed reflects the sense of urgency shared by most knowledgable Alaskans.   ADN Op-Ed by Tom Maloney.  … In 2005, the state predicted TAPS production would average 832,000 barrels per day (bpd) in 2010. Actual production was 644,000, 22 percent less than forecast. In 2005, the state forecast 762,000 bpd in 2015. Yet current production is 630,000 bpd and falling.  Oil production is declining faster than expected. Could it be Alaskans have been trumped by ACES?  We cannot get new oil into the pipeline without new drilling. How much progress has Alaska made since ACES was enacted? The number of exploration wells drilled on the North Slope has fallen from 18 in 2007 to one this year, a reduction of 95 percent. Development drilling is also down. Throughput in TAPS declined by 18,000 bpd in 2008, 24,000 bpd in 2009, and 48,000 bpd in 2010. The sharp decline has raised concerns that current forecasts are too optimistic. 

2.  Yesterday:  Commentary.  The Alaska House Finance Committee yesterday heard the most impressive array of public policy testimony this writer has witnessed in four decades of "Legislature Watching" (More event photos below).  It was impressive for two reasons: 1) witnesses represented the overwhelming majority of Alaskans and 2) witnesses successfully communicated the looming economic reality we have covered for several years in this webpage: "Without decisive and immediate investment climate improvement Alaska’s economy and prosperity are destined for an imminent ‘crash’".  The day began with a turnout of two dozen citizens with "Pass HB 110" signs greeting legislators coming to work (Photo: Dennis Hebner, SteelFab).  Witnesses were ‘invited’ and all supported passage of legislation to improve Alaska’s oil and gas investment climate.  One might conclude that other Alaskans might have testified against the legislation (HB 110).  However, one also notes that witnesses probably represented 90% of Alaska’s population–unlike the ‘hit and run’ KTUU report which did not fairly communicate the true tone of the all-day event–providing unambiguous support for tax improvements.  Though the Committee heard many witnesses without questions, the questions asked could roughly be segmented into "soft ball" questions by the majority of Members favoring passage of HB 110 and "gotcha attempt" questions posed by a minority of Members appearing to oppose modification to Alaska’s confiscatory severance regime.    

Our detailed story and photos are under construction and we plan to update them.   (KTUU Story)  -dh

Event Photos (more coming):