Alaska oil industry leadership testifies: state tax policy: to 'eschew' or 'issue' pink slips.

AuthorResz, Heather A.
PositionSPECIAL SECTION: Oil & Gas

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If not for sustained low oil prices, the purpose of Alaska Governor Bill Walker's press conference March 21 might have been a celebration of the 17,500 barrels a day of new oil flowing through the Trans Alaska Pipeline System since December 2015.

Instead, Walker announced an increase to $4.1 billion in the state's expected 2016 budget deficit.

But the state is not the only entity making hard decisions since December 2014 when oil prices dropped below $60 a barrel, dipping as low as $26.23 on January 20.

On top of 9 percent oil industry employment declines in 2015, oil and gas companies and industry contractors expect to lay off more than three thousand people this year, according to industry experts.

Alaska Oil and Gas Association President and CEO Kara Moriarty said producers expect to lose $1 billion in 2016. To reduce losses, she said companies are expected to issue pink slips to more than one thousand workers by the end of the year.

"Some companies have left, some have canceled or delayed projects, and many are laying off workers under current market conditions," Moriarty said.

Companies have reduced profits, increased prices, and spent down their savings to avoid layoffs, according to hours of testimony during more than twenty hearings to the House Resources Committee, which introduced a rewrite March 19 of Walker's bill to re-write the state's oil and gas tax structure to increase the minimum tax to 25 percent and erase millions in currently eligible tax credits for industry.

Support Industry Hard Hit

Doug Smith with Little Red Services shared the company's struggle during testimony to the committee March 2. Little Red initially avoided layoffs by reducing profits and raising prices, but that wasn't enough, he said.

With crews no longer working in the field or doing transports, Smith said the company has been forced to reduce payroll through $2 million in layoffs, the first since 2009. Many of these positions are well-paying, family wage jobs.

"We do things that have an immediate potential production increase on wells," he testified about Little Red's work on the North Slope. "It's one of the last things you trim out in a declining market. And we are there."

Overall rig activity on the North Slope is down three rigs--nearly 60 percent--this year, Smith said.

Alaska Support Industry Alliance General Manager Rebecca Logan said low oil prices have led to about two thousand layoffs in the support industry, with more expected.

"That number is only going to get worse in the next couple of months," she said.

Alaska runs on oil, Resource...

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