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FACTS ABOUT ALASKA'S OIL & GAS INDUSTRY
- The oil and gas industry creates more than 34,000 jobs a year in Alaska.
- Total petroleum revenues for FY 07 are projected to be over $5 billion, an amount that has doubled since FY 04 due to high prices and changes in Alaska’s tax structure. This includes property taxes paid to local communities, and deposits into the Permanent Fund.
- Projected oil and gas revenues for FY 07 will provide 89% of the state’s unrestricted general fund.
WHERE IS THE ADDITIONAL OIL GOING TO COME
FROM TO FILL OUR PIPELINE?
- Maturing North Slope fields are in natural decline.
- The oil pipeline is currently operating at onethird capacity.
- While the price of oil is important in assessing Alaska’s revenue picture, production is also a vital component of the equation. Daily production has plummeted 65% since 1988 and continues to decline by more than 6% annually.
- Billions of barrels of oil remain on the North Slope, but the resources are challenging and expensive to develop. In 10 years, 50% of Alaska’s oil will need to come from new sources, requiring huge new investments from industry.
A HEALTHY INDUSTRY CANNOT ENDURE
TAX CHANGES YEAR AFTER YEAR
- The PPT tax system – adopted just one year ago – resulted in an additional $1 billion in taxes last year alone. Now the industry is facing an additional $700 million in new taxes.
- Two years ago, by administrative action, an additional $150 million in taxes were levied against the industry.
WHY A THIRD TAX HIKE IN THREE YEARS IS A BAD MOVE
- Alaska is now the highest taxed oil region in North America. When combined with other factors such as operating costs, labor, and environmental challenges, Alaska is among the highest cost regions in the world. Higher taxes will only exacerbate the challenges of rising costs and will dampen investment.
- Alaska ranks a dismal 99th out of 103 world regions in terms of tax stability. The oil industry needs a stable tax regime to move projects forward.
- Billions of dollars in new wells must be drilled to keep falling production from accelerating. Higher taxes may ultimately result in less revenue to the state as critical investment dollars needed to slow the decline in North Slope production are directed outside Alaska to other projects with better rates of return.
- Alaska can’t tax its way into prosperity. To sustain its economy, Alaska needs to encourage new investment to get more oil in the pipeline.
- Where will this capital come from? It will come from industry profits. The greater the profit, the more likely these investments will be made.
- Other industries and businesses across Alaska's economic spectrum are worried higher taxes will further erode our fiscal stability. We run the risk of chilling our fragile investment climate across all resource industries.
- As investment and oil production wane under the weight of heavier taxes, all sectors in the state would experience a significant economic slowdown.
- Now is not the time to be changing the tax structure when all other factors, including the increased attention from environmental groups/global warming/litigation are working against Alaska.
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