by Whitney Pitcher
As Southcentral Alaska prepares for an increase in oil and gas exploration and development in the Cook Inlet basin, operators on the North Slope and nearshore Beaufort Sea are preparing for what promises to be one of the busiest exploration seasons since 1969, when 33 exploration wells were drilled after the discovery of the Prudhoe Bay oil field.
If all goes as planned, as many as 28 exploration wells could be drilled between October 2011 and mid-2012. It’s a longer-than-normal North Slope exploration season because one company’s wells can be drilled from old gravel sites along the Dalton Highway and therefore are not subject to off-road tundra travel restrictions.
Much of the stepped-up activity appears to be partly due to the exploration incentives offered by the state of Alaska, and partly because Alaska’s governor is committed to fixing provisions in the state’s production tax that could make development of any oil discoveries noncompetitive for investment capital with projects in other oil provinces.
The exploratory incentives are a key part of the oil tax legislation championed by Governor Palin, as the legislation included tax credits for companies to both encourage new development and to reinvest in the existing infrastructure of older development. As Governor Palin noted upon signing ACES into law in December of 2007, “[w]ith the signing of this bill, we can turn the page and look forward to a new era of stability and investment opportunities developing Alaska’s resources, creating new jobs and a strong economy for years to come”.
This is exactly what has happened since the passage of ACES. It has given Alaska a strong economy. During her tenure, Governor Palin had the 2nd best job growth record in the country. Every year of her administration yielded a record high number of oil industry jobs in Alaska. This news of a very busy exploration season indicates that indeed ACES has ushered in a “new era of stability and investment opportunities for developing Alaska’s resources”.
The companies that are involved in drilling these new exploratory wells are mainly independent Alaskan companies and foreign companies. Governor Palin’s ACES oil tax structure replaced Governor Murkowski’s corruption tainted PPT oil tax structure which favored Murkowski’s cronies in the oil industry. Governor Palin’s legislation on the other hand provides opportunity for all companies to be engaged in resource development. This kind of policy is what led to, as of January, a doubling in the number of companies filing taxes returns with Alaska since the passage of ACES, indicating that more companies see Alaska as a great place to invest in oil development. In addition to the incentives for development that ACES provides, it also was negotiated and passed in a transparent manner without undue influence from lobbyists or only certain oil companies.
One of the foreign companies is the Spanish company Repsol, who announced in March that they would be devoting more than three-quarters of a billion dollars for development on the North Slope (emphasis added):
“This deal is a perfect fit in our efforts to balance our exploration portfolio with a lower risk, onshore oil opportunities in a stable environment,” Repsol CEO Antonio Brufau said in a statement.
ACES has provided a stable environment for Repsol to engage in exploratory drilling that includes 5 rigs and up to 15 wells. This speaks well of the state level policies that Governor Palin implemented. Additionally, though, the fact that a Spanish company is seeking to engage in oil development in America may be a result of what Governor Palin warned about at the India Today Conclave speech in April where she discussed the effects of a “green” economy (emphasis added):
So as government locks up land & we lose good jobs in the ‘Conventional Resource’ arena, you may hear that “green jobs” will be the saviour! But look around the world & try telling that to the thousands of English & Scottish workers who’ve lost jobs as a result of government investments in “green energy” projects. A recent UK study shows that for every “green job” created, nearly four jobs were lost elsewhere in the economy due to lack of affordable energy! Same story in Spain – investment in “green jobs” brought massive debt, skyrocketing energy costs & 20% unemployment.
Spain has proven oil reserves of about 150 million barrels. While this is nothing compared to the vast resources available in Alaska, it is certainly worth noting. Between 2005 and 2009, Spain’s oil production volume has decreased by nearly eight percent. Has a focus on “green” energy (leading to reduced oil production) also caused Spanish oil companies to seek development opportunities elsewhere because these areas are a “stable environment” as Repsol said of Alaska? Should not Spain’s example serve as an economic warning to America as Governor Palin indicated? Will an aversion to traditional fossil fuels development lead American oil companies to explore more profitable options elsewhere?
It has become increasingly evident that Governor Palin’s ACES legislation has done just what she intended it to do—spur economic growth, create jobs, and provide stability and continued oil development. It has not only provided opportunities for development by the likes of ExxonMobil or Shell, but it has also provided independent companies and foreign companies to invest in exploration. As our current administration seeks to create a “green” economy, the successes of Governor Palin’s administration should cause America to look north to the future in order to truly win the future.