The mission of the Alaska State Chamber of Commerce is to promote a positive business environment in Alaska. It is something our members believe in passionately. Why? Two-thirds of the jobs held by Alaskans are generated by the private sector. Without a healthy business environment, those jobs, and the quality of life we enjoy as Alaskans, will erode.
A recent study by the University of Alaska Anchorage’s Institute for Social and Economic Research describes Alaska’s economy as having three legs — the oil and gas industry, the federal government and the combination of our other industries such as fishing, mining and tourism.
While maintaining a positive relationship with the federal government is clearly important, creating and sustaining a business environment that attracts private-sector investment must be our number one priority. Put simply, more than 230,000 jobs are at stake.
Unfortunately, 2009 has been filled with disturbing news.
Production flowing through the trans-Alaska pipeline system continues to decline — off nearly two-thirds from its historic peak. Lower TAPS throughput is troublesome not just for the oil and gas sector, but also for state government — according to ISER, oil revenues have paid almost all the state’s general expenses for more than 40 years.
Earlier this year, ConocoPhillips announced a reduction of 80 positions due to an expectation of less work on the North Slope. Chevron also announced its own layoffs due to production declines and high operating costs in Cook Inlet. During a recent business conference in Anchorage, a senior ConocoPhillips’ executive declared the company will not conduct an exploration-drilling program in the state during 2010. At the same event, BP made known its plans to cut 2010 spending in Alaska by 15 percent. When the operators of North America’s two largest oil fields — Prudhoe Bay and Kuparuk River — significantly reduce their Alaska business, Alaskans should be very concerned.
In addition to commodity price fluctuations and increasing costs, Alaska is also faced with growing competition for oil and gas industry investment dollars. The deepwater Gulf of Mexico continues to draw significant capital investment by the world’s major oil companies — BP recently announced a massive oil discovery in the area — and the advent of shale gas plays throughout the Lower 48 has become the focus of many of the country’s leading independent companies.
What can our policy makers do to give Alaska a competitive edge? How can we encourage the development of additional oil and gas production? What do we need to do to create more jobs in Alaska?
First, ensure access to lands that are highly prospective for oil and gas. Although the Alaska state government is largely supportive of responsible development, at the federal level we have witnessed closures in the National Petroleum Reserve and work stoppages in the outer continental shelf, not to mention the deadlock over the coastal plain of the Arctic National Wildlife Refuge.
Second, provide a predictable and reasonable regulatory and permitting process. The concern here has less to do with the actual environmental standards companies are required to meet than with the process and timelines associated with acquiring the permits necessary to work. Permitting delays in Alaska relative to other jurisdictions have a negative impact on investment decisions.
Finally, make investment and increased production, which lead to business opportunities and jobs, the number one goals of the state’s tax system. Since the recent Alaska’s Clear and Equitable Share tax was enacted and nearly tripled oil production taxes, we have seen industry layoffs, cancelled exploration programs and capital spending reductions, all of which indicate the state might have overreached — a risk our economy cannot afford.
It is imperative we encourage our elected officials to do everything in their power to make Alaska an attractive place for investment. A growing private sector means jobs for Alaskans, business opportunities for local firms and critical revenue to state government. Join with the Alaska State Chamber of Commerce to make sure Alaska is open for business.
Wayne A. Stevens of Anchorage is president and CEO of the Alaska State Chamber of Commerce.