Oilfield service companies: production tax said to be jobs-killer.

• Author: Bradner, Mike
• Position: OIL & GAS

How's business for Alaska's oil and gas service companies? This is an important question because these firms, many of them Alaskan-owned, provide the brawn and increasingly the brainpower behind the development of new oil and gas. They are also the companies employing most of the people working in the industry, too. What happens to service companies is vital to the state's economy.

As for business, though, service companies are widely reporting business is down, or stagnant, because of the lack of new development activity. The firms blame this on the State's high oil and gas production tax, which they say is impeding new industry investment in development. Gov. Sean Parnell agrees with this and has a bill pending in the Legislature that would ease the tax.

The issue has become highly controversial, however, and will be one of the hot issues in the 2012 State legislative session, as it was in the 2011 session. Service and support companies are leading a grass-roots effort to build support for the governor's bill, arguing that the tax has been a jobs-killer for them.

CONFLICTING DATA

But is there data that supports the claim? In testimony before legislative committees service company after service company cited their experience of reduced business activity that has forced them to lay off people or go elsewhere for work. But perversely, employment data from the State Department of Labor and Workforce Development indicates not only that the loss of jobs in the industry support sector hasn't occurred, but that employment has actually increased. For example, April 2011 data from the labor department showed 13,100 people at work in the industry in total. That's up from 12,500 in May 2010.

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A different set of Labor Department data for 2010, which are audited and verified, show oil and gas employment at 12,752 in December 2010, up from 11,959 in January 2010. These numbers also break out oil and gas service company employees from producing company employees, which the numbers cited previously did not. The December 2010 total of service company employees is 9,201, compared with 8,427 the previous January.

Other indicators show a similar pattern. Well drilling data from the Alaska Oil and Gas Conservation Commission do show a steady decline in the drilling of new wells since 2007, which coincidentally was the year the Legislature passed the controversial oil tax increase. But the AOGCC data shows drilling picking up in 2010 to some degree, which also fits the pattern of increased activity in the industry. The...