|
Alaska’s oil and gas industry asks state for permitting, fiscal certainty Industry tells what AOGA’s Judy Brady terms ‘a cautionary tale’: state lacks a good investment climate, making Alaska projects a difficult sell to boards Kristen Nelson PNA Editor-in-Chief
The Alaska Oil and Gas Association billed its annual Anchorage Chamber of Commerce luncheon presentation July 15: “A transition report on Alaska’s oil and gas industry to the next administration and the 23rd Alaska Legislature.”
Judy Brady, AOGA’s executive director, called it “a cautionary tale” and said the new governor and new Legislature to be elected this fall “will set the business and economic climate for at least the next four years in the state of Alaska.” And that business and economic climate is crucial to keep Alaska projects competitive within international portfolios, said speakers representing Unocal, Tesoro, EnCana, Alyeska, BP, ExxonMobil and Phillips, who focused on the perpetual cry in the state to raise taxes and royalties on the industry — and the increasingly difficult regulatory and legal hurdles the companies face in the state for exploration and development projects. Potential for another 40 years Chuck Pierce, vice president Alaska for Unocal, reminded the audience that “over the last 40 years the oil and gas industry has been responsible for direct revenues to the state of Alaska of over 65 billion dollars.” The potential is there for another 40 years, he said.
The companies are willing to take the geologic risks inherent in exploration, “but there are commercial risks and there’s uncertainty” and “the significant commercial and legal and regulatory uncertainty that exists in the Alaska system today really puts a damper on accelerated investment and exploration,” Pierce said.
Every year, he said, the industry faces threats of “a change in the fiscal regime — when we have to make three to five year commitments and sometimes longer.” That, he said, “is not a recipe for selling these projects to our boards.”
On the regulatory side, Pierce said: Industry wants “clarity on standards and clarity of process so we can plan our businesses and our investments appropriately.”
“We don’t need moveable goal posts,” he said.
Then, he said, there are the “uncertainties and threats posed by frivolous lawsuits by obstructionist groups … funded primarily by out-of-state money (who) are dedicated to — quite frankly — to destroying the oil and gas industry in the state.”
Pierce said he thought the Knowles administration had done a good job in making lands available for exploration and in responding to crisis situations that have arisen.
“But I believe that the state needs to take the game to a new level,” he said.
“The new governor should commit the state to achieving an average 5 percent year-over-year increase in oil and gas production for the next 10 years. … commit to freeze any and all increase in the oil and gas tax and royalty system for four years… (and) continue with regulatory reform and elimination of frivolous lawsuits.” Time is money Jeff Rose, senior vice president of offshore and new venture exploration for EnCana Corp., said EnCana has just had what is probably the largest discovery in the U.K. North Sea in the last 15 years at its Buzzard field and would like to make similar discoveries in Alaska.
“But it takes more than exploration success,” Rose said.
“Time really is money to all of us and especially for an independent explorer. In order for us to be successful, we need a stable fiscal regime, a consistent and predictable regulatory process and reasonable access to land and infrastructure.”
Alaska has access to land, he said, but EnCana owns no processing facilities or pipelines in Alaska, so “our biggest challenge is getting our yet-to-be discovered Foothills gas to market.”
He asked for “the continuing support of the Alaska government in streamlining the permitting and regulatory process… (and) support to remove the uncertainty surrounding pipeline access.”
Permitting could kill Point Thomson Jack Williams, Alaska production manager for ExxonMobil Production Co., said owner companies plan a final development decision for the Point Thomson gas cycling project in early 2004. “That decision,” he said, “will be based on project economics and the ability to secure permits from the agencies.”
Securing permitting certainty by the end of 2003 is the critical path for the project, he said.
There have been permitting delays for North Slope projects, Williams said. “For Point Thomson an expeditious permitting process is absolutely critical…
“I don’t want to sound too alarmist,” he said, “but delays or uncertainties could very well kill this project. We will do our level best to ensure that does not happen, but we’re going to need some help from local, state and federal permitting agencies.” Systemic solution needed Kevin Meyers, president of Phillips Alaska Inc. and of AOGA, said investment was crucial to Phillips’ goal to maintain its Alaska production — but Alaska projects, he said, compete with others in the company’s worldwide portfolio.
Over the last 10 to 15 years, he said, industry and the Legislature and the administration have worked very hard and accomplished a lot: “We’ve opened up acreage with areawide leasing and NPR-A resales. We’ve had fiscal stability for the industry … (in spite of) fights every year. …
“But let’s not kid ourselves,” he said: “The easy stuff is behind us.”
As the state struggles with the fiscal gap “it will be very temping to come after the familiar target — the oil and gas industry. To come after them with increased taxation.”
That, Meyers said, “would have serious ramifications on Alaska’s competitiveness.
“The state needs to be out there encouraging new development investment, not discouraging it with new taxation.”
And the uncertainties and inefficiencies in the permitting process need to be fixed.
“We need to get the patient out of triage and on his way to recovery and on his way home.”
Phillips got through its permitting hurdles, Meyers said, “but it hasn’t been without pain and grief and we seem to be fighting day-to-day. We need to get a systemic solution out there.”
| 