Dunleavy misleads Alaskans on key piece of oil production guesswork a decade ago

In his State of the State speech Tuesday, Gov. Mike Dunleavy touched briefly on the history of oil production guesswork in Alaska and quoted a misleading statistic.

“Back in 2013, after years averaging 6 percent annual production declines, the forecast for production in the current year was projected to be a mere 340,000 barrels per day. Instead, we are in fact at around 500,000 barrels with multiple large projects in development and billions of barrels still in the ground.”

“Ten years ago some had the idea that the policies didn’t matter, that the oil was running out and a decline was inevitable. There was basically nothing we could do. Today, our production numbers prove that good policy that encourages business works.”

No one with any grasp of the details argued 10 years ago that policies didn’t matter, but that’s not the point of this column.

It’s about the projections made a decade ago.

In the winter of 2011-12, the state guessed that North Slope oil production in FY 2021 would be 458,000 barrels a day. It was a good guess, but the state backed away from it the next year.

As part of the lobbying campaign for the SB 21 oil tax overhaul, the Parnell administration sharply reduced the outlook for future oil production under ACES, slashing the FY 2021 estimate by nearly 100,000 barrels a day to 366,000, and cutting the guess to 338,500 barrels a day by 2022. It’s the latter statistic that Dunleavy quoted.

The lower forecast was a political prelude to Parnell’s tax cut plan, which he introduced on Jan. 16, 2013. The Legislature approved it on April 14. The effort to repeal SB 21 failed in the 2014 primary election, just before oil prices crashed.

As Deputy Revenue Commissioner Bruce Tangeman said at the time, “My personal goal was to put a production forecast line out there and beat it for a change.”

The Parnell administration had claimed that previous production forecasts had always been too optimistic about future production. But the analyst who had done a lot of work on these forecasts, Dudley Platt, said the system set up under Parnell was far too pessimistic over the long term.

Platt contended that the system enacted in 2012 predicted a reservoir decline at existing fields, such as Prudhoe Bay and Kuparuk, that exaggerated the future decline. Platt said Prudhoe Bay and Kuparuk, for instance, would be producing tens of thousands of more barrels per day in 2021 than the state guessed with the new Parnell forecast. Platt was right. The decline was more gradual.

North Slope oil production in FY 2022 is expected to be 487,000 barrels per day, according to the revenue sources book released in December, which is 29,000 barrels more per day than the state predicted in 2011, under the ACES tax system.

A decade ago, Parnell said this in his 2012 State of the State speech: “Members of the Legislature: This evening, I ask you to join me in refilling Alaska’s pipeline to prosperity. You have had time to study this issue closely. We cannot allow the paralysis of analysis to set in. We must act, and we must act now. Let’s meet my goal of one million barrels a day. Let’s enact the oil tax reform and spark investment and growth in Alaska. And let’s show the world that Alaska’s resources can lead to America’s energy independence.”

In his speech Tuesday, Dunleavy didn’t mention 1 million barrels, but he talked about getting increased oil production—300,000 barrels per day, if multiple projects proceed. He gave the impression that political obstacles from the Biden administration are the only real future threat.

He didn’t mention climate change, as if by ignoring the subject he can make it go away. That appears to be his official climate change policy.

In an interview with Alaska Public Media last summer, Dunleavy said he doesn’t accept that there is a scientific consensus that the globe is warming because of the use of fossil fuels.

UN Secretary-General António Guterres said a report released last August was “a code red for humanity. The alarm bells are deafening, and the evidence is irrefutable.”

Dunleavy said the UN should “make sure that all the scientists agree with them because there are some that don’t.”

“Now with that said, if you believe in the different epochs in the world’s history—ice ages, then no ice ages, then very warm periods of time—it would appear that we’ve come out of the Pleistocene, which means we’ve warmed considerably. We’re in what they refer to the Holocene, is where we are now. Does that mean that it’s not continuing to get warmer? Some would say it appears to. I’m not trying to sidestep this. But it’s like the virus. There are differing opinions.”

Dunleavy said, “with regard to the climate, we’re going to continue to have problems, for those that really believe that this is manmade.”

The worldwide response to climate change cannot be ignored, even by Dunleavy, for it will be the single greatest factor deciding the future of the fossil fuel industry in the state. His refusal to accept the scientific consensus on climate change and his failure to recognize how this will impact Alaska and the fossil fuel industry should be a major issue in the campaign for governor.