Today Shell announced it was suspending its 2013 exploration program.  That slides the possibility of new production from Alaska’s OCS forward at least another year and puts new pressure on the Alaska Legislature to enhance the attractiveness of oil investments into existing legacy fields.  From legacy fields, with the correct government policies, new production can come relatively quickly–at least, compared to greenfield exploration in non producing areas of the Arctic OCS.  -dh

Do Tax and Regulatory Burdens Affect Investment Decisions?

ALASKA DISPATCH STORY.  As Alaska lawmakers grapple with whether to cut up to $1 billion annually in taxes on the oil industry, the North Sea oil patch is seeing a 30-year investment high as a result of tax relief from Britain. The Wall Street Journal reports investment in offshore oil and gas projects in the U.K.’s North Sea is forecast to rise to a record level of at least $19.6 billion thanks to the new tax incentives.  (Commentary: Examples abound of how moderate tax and regulatory burdens — combined with other cost components — improve competitiveness and investment: UK, Alberta, N.D. Texas, etc.   "Other cost components" of investment climates can include proximity to markets, cost of labor, cost/complexity of logistics, climate, potential for force majeur {i.e. earthquakes and weather}, political stability, unsustainable economies, etc.  Alaska has many of these liabilities, including ‘political instability’ associated with unexpected and unneeded tax increases and retroactive taxation.  With a predatory tax environment , oil production is down, threatening the sustainability of an oil-based economy.  Alaska’s available savings accounts are neutralized by its state employee retirement system unfunded liability and  this year forward lawmakers may be tapping the savings that could fund the state pension program.  Translation: deficit spending.  Oil taxpayers have to be deeply concerned that absent a sustainable tax and spend environment, their business planning models lack certainty.  Reestablishing political stability, such as was done in 1981, is one of the few variables within the control of Alaska decision makers.   See our February 20 testimony on this subject.  -dh)

Cruise NewsAlaska Cruise Association - September 2012 Cruise NewsHere’s an interesting twist: over the past few years, many Alaska companies have moved their operations to North Dakota, where there’s a huge oil boom under way.  Now, North Dakota businesses are coming north to Alaska – via cruise ship.  The Greater North Dakota Chamber is hosting a cruise Sept. 11-21 that includes a visit to Denali and a cruise through Prince William Sound and the Inside Passage.


Star Tribune by David Phelps.  Delta Air Lines is taking the North Dakota oil boom seriously.
The Atlanta-based carrier announced Monday that it is adding twice-daily nonstop flights between the Twin Cities and Dickinson, N.D., a city of 18,000 on the edge of the state’s Bakken oil fields.  North Dakota emerged as the nation’s No. 2 oil producer last year behind only Texas, creating scores of new jobs that continue to attract workers from across the country. Many of the state’s newcomers were from Minnesota.

Commentary: We have continuously urged Juneau and Washington decision makers to encourage domestic energy production on state and federal lands in Alaska, and elsewhere.  In Alaska’s case, Juneau lawmakers created such a predatory tax structure several years ago that production is declining rapidly.   A new group of legislators is now attempting tax reform.  The federal government has fought production increases by continuously blocking or slowing permit approvals and creating new, restrictive land and use designations–particularly in the last 4-5 years.  However, we see no evidence that the majority of federal lawmakers or the Obama Administration has much intent to reform the dangerous regulatory practices we have documented herein.  Alaska’s huge potential to energize America’s energy independence, economy and job market wanes.  Meanwhile, North Dakota and other Lower 48 venues — not held hostage to state and federal land regulatory control — are booming.  Today we include examples of North Dakota prosperity that we hope will help motivate Alaska decision makers in the state and national capitols.  -dh

Lisa Murkowski, US Senate, Energy Plan, NARUC, Photo by Dave HarbourYesterday, U.S. Senator Lisa Murkowski (NGP Photo) testified before the House Energy and Commerce Subcommittee on Energy and power, and provided her recently released  Energy 20/20 blueprint.  We urge readers who have not done so to review her initial announcement recently in Washington in detail.  It acknowledges — as does the Chevron statement here — the principle role played by hydrocarbon energy and the particular value to the US economy of domestic energy production.  -dh

Rigzone: API Addresses Record-High Gasoline Prices  – "With Michael Whatley, Consumer Energy Alliance, gas prices, Photo Copyright Dave Harbourgasoline prices already approaching $4.00 per gallon and projected to reach all-time record highs during the upcoming driving season, the economy continuing to struggle and unemployment rates refusing to come down, developing domestic energy resources is more important now than ever," said Michael Whatley (NGP Photo), executive vice president of Consumer Energy Alliance, to Rigzone.

Chevron’s Version of How Energy Can Supercharge America’s Economy:  One of the greatest challenges facing the United States today is restoring our economic strength. Fortunately, this challenge comes amid an energy renaissance that could reverse more than 20 years of domestic crude oil production declines and position the United States as a global leader in natural gas production.  Indeed, the energy renaissance already has become a catalyst for economic growth, bringing affordable energy, jobs, revenues and an accompanying resurgence of manufacturing. It is providing the U.S. government with a historic opportunity to dramatically enhance national energy security and affordability when America needs it most.  It is no secret that reliable and affordable energy underpins virtually every element of the global economy, providing mobility, power generation, heating and cooling. Indeed, the energy economy keeps our industries competitive, bolsters consumer confidence and pocketbooks, and promotes improved living standards. In economic terms, the U.S. crude oil and natural gas industry contributes more than $1 trillion annually to the U.S. economy, or more than 7 percent of the U.S. gross domestic product. And it supports more than 9 million jobs.


Today’s Consumer Energy Alliance News Clips:


Akron Beacon Journal: Group offers a look into today’s higher gasoline prices  – More oil is being produced but worldwide demand continues to climb due to pressure from fast rising Chinese and Indian markets. To the north, Canada is consistently producing more oil than can be physically transported to markets, resulting in a discount that has reached as much as $60 a barrel. Here at home, because of horizontal drilling and advancements in hydraulic fracturing, the United States is on pace to overtake Saudi Arabia as the world’s top oil producer. With all this oil, why aren’t gasoline prices dropping?

Wall Street Journal (Blog): Ottawa’s Envoy to U.S.: Will That Be Venezuela or Canada Crude?  – Canadian officials have been ramping up their public lobbying in support of U.S. approval of TransCanada Corp. Keystone XL pipeline expansion. The Obama administration is expected to make a ruling in coming months. Amid that campaign, Gary Doer, Canada’s ambassador to Washington, told Canada Real Time that he has a question for the American people: “Do you want your oil from Hugo Chavez or do you want it from Canada?”
San Antonio Express: Senators call for speedy Keystone XL decision – A bipartisan group of 20 senators on Tuesday implored former colleague John Kerry to ensure the State Department approves the proposed Keystone XL pipeline by April. In a letter to Kerry, the newly installed secretary of state, the senators insisted that the Obama administration should keep to its earlier announced timetable for deciding whether the $7 billion project is in the “national interest.” Pipeline advocates fret that the final decision could stretch long beyond the end of the first quarter, when the State Department previously predicted it would be done reviewing the project.
Platts: Obama is likely to reject Keystone XL pipeline: Republican congressman – Because of the influence of environmental groups, the Obama administration will likely reject the Keystone XL pipeline, a Republican member of Congress said Tuesday in Washington. "Some think it is a 50-50 proposition," US Representative Lee Terry said. "But the environmental movement has made it their No. 1 issue and has put the White House in a predicament. I just don’t think the administration will approve it." Speaking before the Natural Gas Roundtable, the Nebraska Republican said Secretary of State John Kerry had opposed the pipeline when he was a Democratic senator from Massachusetts. Now it is Kerry’s responsibility to present recommendations to the president, Terry said. 
Associated Press: As drilling boom approaches cities, a backlash grows in Colorado, other states – Colorado regulators grappling with a historic energy boom that’s pushing oil rigs to the very doorsteps of suburban schools and homes were among the first in the nation to require companies to disclose the chemicals they use in their new drilling techniques. Now, the regulators have issued what they tout as the country’s toughest energy drilling regulations, requiring rigs to be at least 500 feet away from occupied buildings and take other steps to limit pollution. But few are pleased, underscoring the difficulties that governments across the country are facing as they try to regulate an industry that is moving ever closer to people’s neighborhoods but also contributing jobs and millions of dollars to local economies.
Politico Pro: Sources: EPA, DOE nominations this week? – Is the White House finally ready to unveil the future of President Barack Obama’s energy team? Some sources who are closely following the decision say it could happen as soon as Wednesday — and they’re expecting a joint announcement that the president wants Gina McCarthy to head the EPA and Ernest Moniz to run the Energy Department. One source said a combined EPA and DOE nomination announcement would come either Wednesday or Friday, with the latter seemingly unlikely because it is the day that automatic budget cuts could go into effect. The White House has declined to comment on the timing or on whether McCarthy and Moniz are the choices.


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By | 2016-12-22T22:31:14+00:00 February 27th, 2013|Alaska Taxes, Commentary, Federal Obstruction|0 Comments