Far from the ‘last days’ of oil

WASILLA — Alaska is not in the “last days” of an oil economy, and the state’s oil and gas industry will continue to look for ways to keep production at sustained levels on the North Slope as well as Cook Inlet, according to the leader of an Anchorage-based industry trade association.

Kara Moriarty, president and CEO of the Alaska Oil and Gas Association, addressed the weekly meeting of the Greater Wasilla Chamber of Commerce Tuesday. Her presentation sought to dispel what she said were myths about one of the state’s largest employers, specifically with regard to output, tax credits and the future of liquefied natural gas.

“We would agree that Alaska needs to have a more diversified economy, but we would not agree that we are in the last days of an oil economy,” Moriarty said in her opening remarks.

Moriarty said the industry accounts for about a third of the jobs in the state and employs a significant number of Mat-Su Valley residents.

“Whether they work on the Slope or in Anchorage or in Cook Inlet, many industry workers reside right here in the Valley,” she said. “They are paying your local property taxes … and there is a huge impact on the Mat-Su Borough from those jobs.”

According to state statistics, the highest paying jobs for borough residents come from the oil and gas industry, with workers earning an average of $100,584 annually. According to 2014 statistics provided by state economist Neal Fried in a presentation earlier this year, more than 3,500 borough residents work on the North Slope, a number that grew by more than 2,000 in 10 years.

Moriarty said that although North Slope oil production has been declining since 1989, that output saw a bump up in two periods since the turn of the century: when the Alpine and Northstar fields came online around 2002 and a more recent spike in the last year. “Production held steady and then it began a natural decline again,” Moriarty said, adding that the latest increase came in the last fiscal year.

“We had a 3 percent increase in production from June 2015 until the end of June 2016,” she said. “And that shows that if you have the right set of policies in place, and investments happening, that you can maintain and even increase production.”

Cook Inlet also has seen a resurgence in both oil and gas production, partly due to state tax incentives, she said.

The myth that the North Slope is running out of oil also is a nonstarter, she said.

“I know a lot of policymakers have said we need to shift away from oil and move to other sources of energy, but the fact is Alaska has a lot of oil left,” Moriarty said. “In the existing North Slope fields and on state land we think there’s about five billion barrels left. We have produced 17 billion barrels and counting.”

And getting that oil into the trans-Alaska pipeline is reaching an important juncture, Moriarty said. Currently, throughput in the 800-mile pipeline is around 530,000 barrels a day.

She said current North Slope projects like Hilcorp’s onshore Moose Pad, offshore Liberty prospect and an onshore Armstrong Alaska development are poised to possibly boost production by several hundred thousand barrels a day. Smaller fields also are contributing to an effort to put more oil in the pipeline, she said.

“The point is, Alaska needs it all,” she said, adding that officials at Alyeska Pipeline Service Co., which manages the line, have said that engineering questions have yet to be answered as to what will happen to the viability of line when output reaches 300,000 barrels a day.

“In looking at the state forecast, we could be under 300,000 barrels a day in the next decade,” she said.

Moriarty said even with the current economic climate of crude oil at $40 per barrel, there are still more companies in the state. She added the belief that Senate Bill 21 — which survived a ballot measure repeal effort in 2014 — was an oil company giveaway was false.

“A lot of blog traffic lately has been blaming the state’s fiscal crisis on Senate Bill 21,” she said. “Senate Bill 21 did not lead to the state’s budget shortfall. The state department of revenue has said time and time again that Senate Bill 21 generates more revenue for the state (at low oil prices) that ACES did,” she said of former Gov. Sarah Palin’s industry tax plan.

“Nobody forecast these extremely low (oil) prices,” Moriarty said. “And there have been cutbacks because of it. We don’t think they are going to stay low forever and it was important as the tradeoff (with SB21) that we would get to keep more at the high end and the state was going to take more at the low end. It was a more predictable, stable stream of revenue that we were paying the state and that the state was receiving from the industry.

“From the industry perspective, the state budget crisis is all driven by price.”

Moriarty said talk of transitioning to an economy based on liquefied natural gas would not more forward without a viable oil sector.

“The fact is it doesn’t matter which gas project it is,” she said of the various LNG proposals, “you will not develop the state’s vast gas resources and not have a healthy oil industry. The infrastructure is compatible. You can’t punish oil and think gas is going to save the day. The hydrocarbons are coming out if the same wells.”