Early warning: state needs to find more black gold sooner rather than later.

• Author: Bradner, Mike

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The big North Slope oil fields are declining in production, faster than expected. To feed its growing state budget, Alaska badly needs to find new oil. Set aside, for a moment, the question of finding new oil and gas fields. The more urgent question is whether there is enough money being invested to stem the decline in the existing fields, to maintain the existing, but aging infrastructure, and to tap resources that are known but undeveloped, like the huge but tough-to-produce heavy oil deposits?

There are two answers to this: Yes, enough money is being invested, and no, there isn't enough being spent.

The producing companies feel they are investing the amounts that are appropriate given the size of the available resource, the difficult economics of the North Slope, which are actually getting worse, and the changed state of Alaska tax structure, which could get a lot worse.

But others, including some state of Alaska officials, feel the producing companies aren't investing enough. Some companies are being criticized for raking in record profits but not reinvesting enough in the state, in new exploration, for example. There is a more universal feeling, shared by many in industry that the pace of exploration spending for new discoveries must be ramped up.

Alaska is mostly unexplored, not only on the North Slope but in big, untested sedimentary basins of Interior Alaska and even Southcentral Alaska, which has seen more exploration. Many feel not enough new wildcat wells are being drilled.

CLOCK IS TICKING

What about these concerns? Are they valid? Is there anything the state of Alaska can, or should, do? The criticisms are valid, but there are also good reasons why only a given amount of money is being spent despite record high oil prices.

There are things the state can and is doing, such as offering incentives for exploration. However, anything the state does gets political, and Alaska may now be backtracking on an innovative Investment Tax Credit program adopted a year ago by the state Legislature mainly because the program was championed by former Gov. Frank Murkowski and current Gov. Sarah Palin is looking to undo what Murkowski accomplished in his term in office.

A special session of the Legislature was called by Palin recently to reconsider the state's new Petroleum Profits Tax, a key part of which is the tax credit. Political uncertainties, like those now facing the PPT, will cause industry to largely discount state incentives because the companies never know when the politicians may take away the programs. This defeats the purpose of incentives, of course.

One thing the state can do that would really ramp up investment in new exploration and oil development is to make realistic progress toward a gas pipeline, because gas production also will lower costs to produce oil, making more of it economic the produce. However, the gas pipeline question...