It is estimated that Alaska will receive $1 billion more over the next two years in tax revenue at current oil prices than it would have under the old tax system. The new tax law was designed to protect the State when oil prices drop, as they inevitably do. Why would industry advocate for a higher tax rate under the new system? The answer is simple: Stability. Under SB 21, there is certainty that tax rates won’t fluctuate wildly at higher prices like they did under the old tax law.
More Alaska investment.
Alaska oil companies plan to spend an additional $5 billion dollars on new North Slope projects. Newer, independent companies like Caelus Energy and Hilcorp are investing more than $1 billion each on North Slope developments, and Great Bear and Brooks Range Petroleum are drilling new wells. Repsol recently applied for permits for the Nanushuk project after investing more than $520 million in exploratory drilling and seismic work. At legacy fields, like Prudhoe Bay and Kuparuk, the companies have added rigs, increased capital spending and invested in a two-year seismic program.
More production in the works.
Twice a year, the Alaska Department of Revenue publishes their Revenue Sources Book, which includes forecasts for both oil production and price. Citing investment trends on the North Slope, Governor Walker’s Department of Revenue made upward adjustments on future oil production. That makes 4 consecutive increases in the official state oil production forecast.
Alaska has seen the largest number of oil and gas lease sales on state lands in 21 years, and the third highest in State history. It takes many years for companies to move from oil exploration to development, and selling a healthy number of state leases is an encouraging sign of things to come.