Great oil expectations: what do Alaskans want?

• Author: Bohi, Heidi
• Position: Special Section: OIL & GAS

The historic chronicle detailing pre-oil Alaska has become almost as predictable as the monotonous din of a rig turntable going around and around and around.

Before oil started flowing through the pipeline, so the story goes, Alaska was a different place and without it would look nothing like it does today. There were only 150,000 people in Anchorage. Alaskans paid State taxes. There were no arts to speak of. Libraries and schools were modest. There was no Alaska Permanent Fund--or dividend. By modern standards, quality of life was lacking. And this is the short list.

Those were the not-so-good good-old-days. Then big oil rode into town. The $900 million in lease bonuses paid by the oil companies in 1969 for Prudhoe Bay transformed Alaska government. Revenues from production paid for permanent State and local government improvements without leaving behind any pesky tax burdens. Despite some differences of opinion, most Alaskans have seen it as a win-win relationship for both the oil companies and the state: Alaska leases its oil and gas to private oil companies, in turn they carry the investments to explore, develop and produce the resources.

Today, the number of exploratory and development wells has tanked to the lowest levels in a decade. BP Exploration (Alaska) Inc. delayed its development in the western region of the North Slope as a result of the Alaska's Clear and Equitable Share (ACES) tax rates. ConocoPhillips cited the same reason for scrapping a $300 million refinery project and the first time in more than 40 years, it is not exploring. The number of jobs is decreasing and the oil companies do not seem to be bluffing when executives say they will invest elsewhere. Although oil continues to be Alaska's biggest contributor to the economy, the reign of popularity seems to be waning and the future of the petroleum industry in Alaska is becoming downright scary. Oil companies need incentives to stay, but feel they are getting disincentives at every turn. While Alaskans continue to benefit from the industry, whether through direct employment or quality of life, many also support the idea of ACES, which raises production taxes on the industry 400 percent and adds the risk of driving business out of Alaska to where the business environment is friendlier and the profits more promising.

It comes down to short-term gains versus long-term investments, which industry leaders say, results in a system that is bad for both the State and the industry. Alaskans seem to be doing everything they can to grab what they think is their fair share of proceeds from the declining output on the North Slope, saying it's their oil. From an investor's standpoint, Alaska is becoming a less lucrative place to invest exploration and production dollars.

What is it that Alaskans want from the petroleum industry?

TONY KNOWLES

A former two-term Alaska governor (1994-2002) and two-term Anchorage mayor (1981-1987), more than any other politician, Tony Knowles probably knows all facets of the oil industry better than any other elected official in Alaska's history. Currently the executive director of the National Energy Policy Institute...