petroleum industry

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Alaska’s North Slope has produced over 17 billion barrels of oil since the discovery of the Prudhoe Bay oil field. Oil production has been the engine of economic growth in Alaska. It funds about 90 percent of the state’s General Fund unrestricted revenue for most years and over $180 billion in total revenue since statehood. The oil industry accounts for one-third of Alaska jobs and about one-half of the overall economy when the spending of state revenues from oil production is considered (ISER, UAA study 2/2011). In other words, without oil, Alaska’s economy would be half its size. If the oil industry expands and prospers, so does Alaska’s economy. While the economic impact of oil and gas activity and production in Alaska is profound, it is important to note that Alaska production has been in decline since peaking in 1988 when the state produced 25 percent of all U.S. oil. Now Alaska produces approximately seven percent. In fact, the Trans-Alaska Pipeline is now running at three-quarters empty. In recent years, Alaska has fallen from second to fourth in U.S. oil production. With an estimated 50 billion barrels of conventional oil remaining to be developed on the North Slope and offshore areas of the Alaska Arctic, it’s not for a lack of resource that production has declined. The majority of the remaining resource is located on federal lands and offshore areas where access has been blocked either by federal policy, environmental litigation, or a complex and ever-changing regulatory regime. On state lands, the government tax bite under the previous tax system was so high that Alaska was unable to compete with other oil provinces for production-adding investment. The good news is that the new More Alaska Production Act is now drawing billions of dollars in new investment back to Alaska. There has been a resurgence in industry activity on the North Slope, leading to hundreds of new jobs, as well as a record number of drilling rigs operating in the Arctic. The industry is poised to stem an annual seven percent decline in North Slope production. For the first time in more than a decade, the production decline was virtually erased in FY 2014. The Alaska Department of Revenue’s December 2014 forecast is now projecting an increase in oil production over the next two years. The December report is forecasting an increase of 15,000 barrels per day in FY 2016 and 10,000 barrels per day in FY 2017. Given the trend in increasing investment, the state expects oil production will remain above 500,000 barrels per day for the next three fiscal years.