Cook Inlet Oil & Gas Profile: Despite challenging year plans move forward for independent operators.

AuthorAnderson, Tasha
PositionOIL & GAS

Alaska generally focuses its oil and gas attention on the North Slope, where international oil giants operate world-class discoveries and routinely explore for the next major field. But Cook Inlet is a vital part of the Alaska oil and gas industry, and the many independent operators that work there have felt the effects of several tumultuous years. Many have stated that low oil and gas prices and the state's failure to make good on tax credit payments have severely hindered their ability to explore and operate.

On December 15 Governor Bill Walker released his proposed FY 2019 budget, which includes an Oil & Gas Exploration Credit & Repayment Plan. As part of this plan, the state would pay off the remainder of its outstanding future obligations to Alaska's independent oil and gas exploration companies in FY 2019 at a small discount rate (roughly 6 percent to 10 percent), issuing bonds to fund payment of the debt. According to the governor's office, paying these tax credits on an abbreviated schedule (in 2019 instead of by 2025) will give "small operators confidence in Alaska," without costing the state additional funds.

And any additional confidence in Alaska's oil and gas industry is welcome. While oil prices have risen (this year the ANS West Coast Average Spot Price rose from $53.90 in January 2017 to $63.79 in December 2017), projections are that they won't climb much further. In a December 12, 2017, letter to the Governor, Alaska Department of Revenue Commissioner Sheldon Fisher said, "Oil markets appear to have come into balance over the past year, and the Department of Revenue projects that annual average prices will stabilize around $60 per barrel in real terms going forward." Alaska's legislature continues to argue how to address the state's ongoing fiscal instability, which has impacted the repayment of tax credits, and the passage of HB111 in 2017 marks the seventh change in tax policy in the Last Frontier in twelve years.

BlueCrest Energy

Industry projects statewide have felt the effects of uncertainty and instability, especially in Cook Inlet. In September Texas-based BlueCrest Energy paused a drilling program at its 100 percent-owned Cosmopolitan oil and gas asset in Cook Inlet approximately three miles offshore and five miles north of Anchor Point. BlueCrest leadership stated in August, when the company announced the brief suspension of the drilling program, that the state's failure to repay tax credit refunds had a direct...

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