The column by University of Alaska Fairbanks economics professor Doug Reynolds in the Feb. 23 Daily News-Miner challenged the cost and the effectiveness of the greatest giveaway in the history of Alaska — Senate Bill 21.
But the “declining” oil industry that Dr. Reynolds observed has little to do with a lack of large, untapped, technically viable oil deposits on the North Slope. It has a whole lot more to do with what the oil industry has been doing with its massive corporate welfare payments, also known as tax credits.
Although SB21 was promoted as the “More Alaska Production Act,” Alaskans have been left with less of everything. So we’re struggling with long-term declines in oil industry employment, crude production and revenue, Alaska Permanent Fund dividend checks, K-12 and university funding, marine highway service and the list goes on.
When announcing his oil tax “reform” in a March 30, 2011, news release, Gov. Sean Parnell was either setting ambitious goals for Alaska’s oil industry or pushing an epic public deception.
Parnell told us the oil industry would reinvest its lucrative savings to restore North Slope crude production to 1 million barrels per day, while creating tens of thousands of new jobs. SB21 proponents said we should gamble and give it time. It’s now been seven years, and it’s proving to be a failure on all counts.
SB21 showered credits on the Slope’s giant producing fields. Advocates claimed this would create a renaissance in Alaska’s way of life, resulting in a vibrant economy, with plentiful jobs, a full pipeline and revenue to comfortably sustain education, roads, law enforcement and reliable Alaska Permanent Fund dividends.
Although enormous oil deposits remain on the North Slope, three of the four producers benefiting the most from SB21 — Exxon Mobil, BP and Chevron — have done no exploration. In other words, they’re operating in “harvest” mode, while leaving it to new independent explorers to make the North Slope’s largest, recent discoveries.
Reserves over a billion barrels were recently drilled and delineated in the newly discovered Nanushuk oil play, making it among the largest onshore conventional discoveries in North America since the 1980s. The discovery was announced by Armstrong Energy and Repsol in April 2013, two months before Governor Parnell signed SB21. It’s currently being developed by Oil Search.
The North Slope still contains 17.6 billion barrels of additional oil, according to estimates of the mean undiscovered, technically recoverable resources, provided by the U.S. Geological Survey and Bureau of Ocean Energy Management. This December 2017 estimate covers the National Petroleum Reserve-Alaska, the Western Beaufort Sea, adjacent state and Alaska Native lands and state waters.
The oil industry has been shamelessly diverting Alaska’s painfully sacrificed corporate welfare to fund efforts in the Lower 48 and whenever they find better returns on their investments or encounter other needs for cash. Recent examples include BP’s liability for the Deep Water Horizon Disaster in the Gulf of Mexico and Exxon’s new offshore field in Guyana.
In 1990, BP first announced that Alaska’s new role was to generate revenue to fund the company’s search for giant oil fields in places like Kazakhstan, Colombia, and Azerbaijan. No longer would BP be “elephant hunting” in Alaska, searching for large new oil fields.
BP’s Alaska employees were in a banquet celebrating a deal that was being finalized 12 floors above them. It allowed BP to develop the giant Tengiz oil field in Kazakhstan. BP’s CEO Lord John Browne also informed the banquet crowd that BP’s search for more large oilfields won’t be in Alaska.
Alaskans should assert their authority over the oil industry’s lucrative corporate welfare. Just as Alaska compels social welfare recipients to demonstrate compliance with work requirements, Alaskans should insist that their corporate welfare be spent on restoring North Slope production to 1 million barrels per day.
After nearly seven years, Alaska’s oil industry has demonstrated that it doesn’t deserve an automatic, long-term continuation of its sweetheart deal. Since it’s slowly bankrupting Alaska, you should plan on voting Yes for Alaska’s Fair Share.
Ed Davis is a longtime pump station engineer from Fairbanks. He retired from Alyeska Pipeline in 2018, after 21 years. He became a historian for the Alaska’s Fair Share Act initiative campaign.