Through a portal; the grounding of the tanker Exxon Valdez ushered in a new era for Alaska's oil industry.

• Author: Tyson, Ray

THE EXXON VALDEZ OIL spill did more than just raise a nation's environmental conscience; it catapulted Alaska's petroleum industry into a new and troubling era. In the wake of the tanker grounding lies uncertainty for the oil companies that both invested fortunes in and reaped fortunes from North America's largest and most productive oil fields. During the new era, increasing governmental restrictions and regulations on exploration, development and transportation will make it difficult for the industry to function and, therefore, the state to replenish its oil-dependent bank account. The state's economic future does not look secure in the wake of the Exxon Valdez tanker spill; nor do the country's future energy needs. With the supergiant Prudhoe Bay oil field now in decline - and nothing in the cards to replace it---oil executives see state income eroding and the country's domestic oil supply dwindling, forcing the United States to become even more reliant on imports. They also perceive a state government that, for some unexplained reason, is bent on running them out of town and an unsympathetic public that doesn't understand their business.

BP Exploration's Roger Herrera, who as a young man in the early 1960s walked the remote North Slope tundra collecting geological data that helped pinpoint the supergiant Prudhoe Bay field, puts it this way: "It is easy to come to the conclusion that this (spill) is a benchmark event that probably will have a profound impact on Alaska in the next decade. It also is easy to conclude similar impacts on the nation as a whole. The public does not distinguish one accident from another. To the general public, it is all the same."

Arco Alaska President Bill Wade adds, "The thing I worry about is where the future is going to end up. I don't see signs that people are trying to understand industry's problems. I am concerned about all the emotions over the spill. It is carrying the day, rather than people taking a logical, long-term view.?

Public outcry over the 10.8-million gallon oil spill on March 24 was deafening in the months following the tanker grounding, as news reporters across the country descended on Valdez to tell the world about the worst such accident in U.S. history.

In a matter of weeks, Alaska's oil industry began to feel the political effects of the public's outrage. In less than six months, industry's traditionally reclusive world was turned inside out and exposed to a suspicious public that never before really cared about how an oil company operated.

Ironically, many of the events that

affected the oil industry in the wake of

the spill had little or no direct relation to

the transportation end of the oil business,

the side that caused the ecological

disaster. Industry's casualty list, however,

mounted quickly.

Higher Taxes. The most notable

event was the Alaska Legislature's revision

of the long-debated Economic

Limit Factor, a tax measure that was

given little chance of passing before the

spill. The new ELF boosted the severance

tax on the most lucrative North

Slope oil reserves at Prudhoe Bay and

Kuparuk River, while lowering them on

smaller and less productive fields.

The legislature said the new ELF

would assure a fair return to the state - an estimated $2 billion over 10 years

- and encourage development of marginally

profitable fields. But industry,

which took the action as punishment for

the spill and a money-grab by the state,

quickly responded.

In early June, the state's largest oil

producer, BP, suspended its $80 million

Hurl State project at Prudhoe Bay, saying

it needed the money to pay its ELF

bill. Designed to extract an additional

37 million barrels of crude from the

western fringe of Prudhoe, Hurl State

would have generated about $120 million

in taxes and royalties for the state

over 10 years. Also lost were about 100

construction jobs and $6 million worth

of mini-module construction in Fairbanks,

a community hit hard by Alaska's

economic recession.

Arco Alaska, the state's other major

producer, followed BP with its own

headliner: The company dropped its

$58 million...