Oil and Gas

Oil and Gas

  • Alaska is facing a huge fiscal cliff, in part as the result of declining oil revenues
  • Alaska needs dozens of new explorers on the North Slope
  • We need to remove barriers to the smaller companies to drill for oil
  • Alaska needs to stream line the permitting process at the Department of Natural Resources to reduce the cost and time required to move projects forward
  • We need to make more aggressive efforts to extract oil from the Arctic National Wildlife Refuge (ANWR)
  • Alaska has trillions of cubic feet of gas that must be moved off the North Slope to Alaskans and foreign markets based on the economy of scale of a large volume gasline

When Alaska became a state in 1959, we were granted 103 million acres by the Federal Government to sustain our economy and fund State government. As a sovereign resource owner, we have an obligation to Alaskans to get the best return on our assets. Unfortunately we have ceased acting like a driver in oil and gas development and begun acting like a passenger, just along for the ride.

The looming fiscal cliff is a result of bloated budgets and declining oil revenues which will not be reversed by merely transferring billions of Alaska dollars each year back to the existing North Slope producers who control Alaska’s legacy oil fields. Oil, being a non-renewable resource, will continue to decline without numerous new wells being drilled. Alaska needs dozens of new explorers on the North Slope. We need to remove barriers to the smaller companies to drill for oil. We also need to make more aggressive efforts to extract oil from ANWR.

The passage of massive oil tax reform has left a bitter taste with many Alaskans. I share their concern that billions in State revenue were shifted to three oil companies with no commitments in return in a manner that will not result in a long-term oil throughput increases in the Trans Alaska Pipeline System (TAPS). The potential revenue reductions threaten to severely impact future funding for education, public safety, infrastructure development and essential governmental services. The recent referendum effort did not reverse this legislation. As governor, I will respect the will of the voters and give the new system ample time to work. Its proponents promised that under the new legislation there would be a halt in the decline of oil production, jobs and investment on the North Slope would remain flat or increase and it would be relatively revenue neutral to the State as compared to the old system. Although I do not presently intend to offer new tax legislation, I will monitor North Slope activity to ensure those promises are kept. In this and other matters I will be a fierce defender of Alaska’s interests. I also expect the industry to comply with the terms of their oil and gas leases and will act if they do not.

With regard to gas, Gov. Parnell’s policy is one of looking solely to the same North Slope leaseholders to develop Alaska’s resources to benefit Alaska even though it would be a detriment to their competing projects around the globe. This business model has not and will not work to achieve the constitutional mandate that Alaska’s resources be developed “for the maximum benefit of its people.”

I have advocated for a liquefied natural gas (LNG) project, including a large volume gasline to tidewater, since 1977. The gasline I envision will materially extend the life of existing North Slope oil and gas fields, encourage oil and gas production from new fields, deliver affordable local energy, produce significant public revenues, and provide high paying jobs for Alaskans. The deal negotiated by the Parnell Administration puts most the decision-making in the hands of the major North Slope producers with no guarantees a pipeline will be built, or if it is, that it will be built on Alaska’s terms or timeline. As governor, I will review the deal and work with the producers as needed to protect Alaska’s interests. Under my administration the State will finally take the lead on the development of the gasline, including working with the market and the leaseholders to require negotiation and execution of multi-decade gas purchase agreements to allow the long-term financing decisions that will actually result in the construction of a project.

The small volume line that received funding to begin yet another open season preparation would, if built, result in little revenue to the State and increase the cost of energy to a majority of those served. A small volume line has never made any economic sense. It is time Alaska has a governor who puts an end to foolish studies, and understands what is needed to truly engage the world gas markets and finally build the large volume gasline to tidewater on Alaska’s terms. As we enter yet another pre-election study under Governor Parnell’s pipeline deal, we continue to put the decision of Alaska’s future in the boardrooms of our biggest competitors.