Crisis in Oil: Frank Murkowski

Former Governor Frank Murkowski has begun a brief tour of the state to talk about what he sees as a pending crisis in the state’s reliance on oil – and its relationship to gas development.    He says oil production – and the use of the TransAlaska Pipeline — is dropping to dangerously low quantities.

We had anticipated that the gas line would come along in a timely manner to fill the void that is created in oil production.  And I’m convinced that’s not going to happen.  And I think we have to identify what we can do that’s within our control about that situation and address it.

North Slope Production this month is averaging 705-thousand barrels a day. In October of 2006,  when Murkowski was governor, production averaged 753-thousand barrels a day.  That’s about a seven percent decline over three years.  Several factors determine how much oil will come out of the North Slope and monthly rates vary widely.

Murkowski says the state can still take steps to reverse that slide.  He suggests that permitting be eased and that the oil tax structure be changed to encourage development.

As for gas development, he says the state needs to negotiate directly with gas leaseholders – and it must show them fiscal certainty.

Different states take taxes, they take royalties and so forth. And if you’re going to put an investment of the magnitude of over thirty Billion dollars and commit to that, and you’re going to come out with the ability to sell  your product maybe in six, seven years after you sign a contract, you want to have some assurance that there’s some limitation on what government will tax you.

After his speech to the Juneau Chamber of Commerce on Thursday,  Murkowski met with Governor Parnell where he presented the same points.    Parnell has said he has no plans to propose changes to the state’s petroleum tax regime.  He says fiscal certainty is a part of the larger field of Stability.

The state’s policy is to foster economic growth in the future, and that involves a stable investment climate.  And once you open up tax regimes, that drives uncertainty, that drives fewer jobs in Alaska.  So at this point, I don’t see the need to change from a stable fiscal course.

Murkowski has future presentations planned for the Anchorage Chamber of Commerce,  the Alaska Support Industry Alliance and the Fairbanks Chamber in coming weeks.

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