Exploration and production companies warned Alaska state officials at the Anchorage Chamber of Commerce last week that stricter regulations and possibly higher taxes could threaten many producers’ exploration and production plans. Their comments precede a legislative special session scheduled this week to work on a proposed fiscal plan to offset state deficits.
Executives from ConocoPhillips Alaska Inc., BP Exploration (Alaska) Inc., Marathon Oil Corp. and Pioneer Natural Resources Inc., offered their forecasts on Alaska’s energy industry over the next decade at a luncheon sponsored by the Anchorage chamber.
Most of the companies on the panel were optimistic in predicting an increase in exploration, and, among other things, they cited the potential to drill in the National Petroleum Reserve-Alaska (NPR), new technology to improve output from maturing fields, and the possibility of a natural gas pipeline to the Lower 48.
However, they said higher taxes and new regulatory restrictions could jeopardize drilling on the remote North Slope, which already presents significant risks and high costs.
Marathon’s John Barnes said the state’s regulatory environment and uncertain tax situation are the biggest risks facing the energy industry. Ken Sheffield, president of Pioneer’s Alaskan unit, agreed, adding that Alaska was a “challenging environment to achieve investment returns.”
Kevin Meyers, president of ConocoPhillips’ Alaskan operations, said the big question hanging over producers’ heads is the way Alaska solves its chronic fiscal gap. Lawmakers who lean heavily on oil and gas taxes “do so at the risk of the industry’s future in the state,” he said.
Meyers said the proposed gas pipeline could be in operation by 2014, if market prices remain high, federal fiscal legislation is passed, and if a “good deal” is obtained with Alaska officials.
Meanwhile, BP’s Steve Marshall suggested the benefits in recovering the North Slope’s stranded gas. “It would be a real shame if we can’t find a way to commercialize that,” he said.
Alaska Gov. Frank Murkowski also attended the luncheon, and afterward he told the Anchorage Daily News that “industry executives were sending a message to legislators.” The luncheon, he said was not “deliberately timed” to coincide with the special session this week.
The governor also forecast new oil and gas discoveries in the NPR-A and off the coast of the Arctic National Wildlife Refuge, but added, “that will be harder if we don’t put the state’s fiscal house in order.”
Alaska’s budget shortfalls have averaged about $400 million a year, and one proposal would have changed the structure of the state’s oil production tax to bring more money to the coffers. That proposal is not on the special session agenda, said Murkowski.
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