I was delighted to hear that our state legislature is focused and their priorities are straight. February 16, 2011 the state house passed Rep. Bob Lynn’s license plate, and Rep. Seaton’s goeduck clam legislation. In addition, many in the legislature want to fight with the federal government over offshore drilling (OCS) in the Beaufort and Chukchi Seas. I believe it is a nice fight to have. But what these legislators fail to understand is that OCS is meaningless without the Trans Alaska Pipeline (TAPS).
The average Alaskan voter truly does not grasp what a grave situation Alaska is currently in. US Senator Lisa Murkowski informed us when she addressed the legislature this session, that we are required by law to dismantled TAPS when the oil stops flowing. This date is fast approaching if oil tax reform legislation is not addressed this session. However, we have legislators who make impassioned speeches on the senate and house floors about how the federal government is impeding Alaska from exploration and drilling in the Chukchi and Beaufort Seas. Then travel to DC to wave their fist at Energy Council and federal bureaucrats while at the same time ignoring the fact that Shell needs TAPS to be operational for OCS in 2025. There appears to be a huge disconnect with some members in the legislature that Alaska must stem the decline in oil production while we wait for OCS.
Cam Toohey, Shell’s Governmental Affairs Manager presented to Commonwealth North’s Energy Action Coalition on March 18, 2011. Toohey presented the challenges Shell has experienced bringing OCS online. Shell has given $2,500,000,000 ($2.5 billion) to the federal government for leases, and has been prohibited to proceed with OCS due to lack of federal permitting on behalf of an activist Obama administration, and hysteria over the Louisiana BP oil spill. Shell is five years into it’s “use it or lose it” 10-year leases in the Beaufort and Chukchi Seas. Shell’s leases will not be reissued if Shell is unable to demonstrate that the projects are moving forward by the end of their leases in 2016. 2015 is the year that has been benchmarked, as the year in which the oil producers will decide whether or not TAPS is economically viable at oil production levels less than 500,000 barrels per day. The benchmark is based on current levels of production forecasts if we continue on the path we are currently on.
Many in Juneau want to continue on the same path, and believe that our existing oil tax policy Alaska’s Clear and Equitable Share (ACES) is working for the state of Alaska. ACES tax structure does not provide the argument to those who sit in oil company boardrooms that Alaska is worth investing in. Alaska’s oil producers must believe that there is a tax structure that will not change from year-to-year if we expect them to write billion dollar checks to extend the life of TAPS for another 30 years. Extending the life of TAPS will require more investment in technology, innovation, and talent to recover more challenged oil (viscous and heavy) from our existing fields, and will keep TAPS throughput above 500,000 barrels per day until OCS comes online in 2025. However, the capital investment required to get at viscous and heavy oil is unattractive to the oil producers because ACES takes away the upside from this initial investment.
The legislature needs to be doing all it can to encourage investment from our largest taxpayers, and stem the decline in TAPS. Unfortunately, we have some legislators whose rhetoric is not matching their actions e.g., the federal government needs to get out of way so we can proceed with OCS, and in the same breath, we want to take as much as we can at the expense of TAPS. Which is it? Do you want OCS or not? I am not sure the legislature is capable of making decisions because they not accomplishing much this session and they remain unfocused.
Alaskans must demand that our legislature focus on sustaining our economy, putting Alaskans to work, and extending the life of TAPS. If not, all Alaskans will have are visitors from other countries whose drivers licenses’ will expire when their visas do, pretty license plates to look at because we will not be talking on our cell phones, and apparently more goeduck clams. Not exactly legislation that will move Alaska forward and into the future. OCS can be Alaska’s future. But, we can’t get there without a pipeline.
Follow Deborah: http://dbrollini.blogspot.com