North Slope oil production is state’s most pressing issue

We are now more than two-thirds through the session and I am proud to report back to Alaskans on the progress we’ve made in Juneau. In January, the Senate majority set out to accomplish three goals: Increase oil production, reduce energy costs and control government spending.

The downturn in oil production on the Alaska North Slope is clearly the most pressing issue for our state. The Department of Revenue projected the decline in oil production to continue at a rate of 5.5 percent per year through the next decade if ACES remains in place. Decline is simply unacceptable. The Senate majority recognized that ACES is broken and chose a different path. We passed a new oil tax plan Wednesday night to spur production by making Alaska competitive while remaining fair to Alaskans.

The Senate’s oil tax bill will protect Alaska at both low and high oil prices, while encouraging production in new and legacy oil fields. It sets a base tax rate of 35 percent, offset by a $5 per barrel credit. In contrast to the governor’s original bill, this feature will reduce the financial impact on the state treasury, while making Alaska competitive with other states like North Dakota and Texas across a broad range of oil prices.

ACES gave nearly $1 billion in tax credits to oil companies, with little new production. Our bill eliminates the credits in ACES and ties tax reduction directly to new production. The legislation does this by establishing a gross revenue exclusion (GRE) to allow companies to subtract 20 percent right off the top for new oil. The GRE gives producers a strong incentive to go after new oil in both new and legacy fields, where the vast majority of Alaska’s recoverable oil is.

To put our heads in the sand on this issue would be to guarantee Alaska its own fiscal cliff down the road. We must not forget oil revenue pays for more than 90 percent of the state’s services. Clinging to the status quo means being forced to cut funding for roads, schools and other basic services. The legislation we passed through the Senate will attract investment and create thousands of private sector jobs while stabilizing the revenue stream our state depends on. Oil production will not turn around overnight, but we believe these changes will set us on a responsible path to put more oil in the pipeline over the long term.

The Senate majority also chose to tackle in-state energy needs this session. Energy prices continue to rise at an alarming rate and Alaskans are looking for short- and long-term relief. We responded by passing Senate Bill 23 to provide trucking of liquefied natural gas (LNG) and propane from the North Slope to the Interior.

We must continue to seek a long-term solution for Alaska’s energy needs, but we cannot afford to wait while our communities suffer. Trucking LNG to Fairbanks is a viable short-term option to provide relief where it’s needed most. LNG trucking will also clean up the air in Fairbanks by replacing wood burning while building out a distribution system that will be needed once as longer term solutions are place, such as a pipeline.

The Senate majority went into this session looking to bring financial responsibility to Juneau, which is why controlling government spending is one of our top priorities. The public trusts us as legislators to be good stewards of the state treasury and to use every dollar for a legitimate purpose of government. The reality is Alaska’s oil production is down, and with it money for state services. If we want to be sustainable into the future, we must control government spending to reflect government revenue.

Alaska has $18 billion in the bank, which can only supplement current spending and revenue rates for about a decade. After 2023, our budget can no longer be sustained by projected revenues, which is why we plan to tighten our belts now to avoid the budget crisis looming over the horizon.

Next week, we will be taking up the capital and operating budgets with steely eyes looking to cut out waste and save Alaskans money. We will ensure funding for necessary services, while cutting back on programs Alaskans can do without. Our budget, in conjunction with our new resource development plans, will ensure the long-term fiscal health of Alaska.

We’re now down to the last third of the session. We’ve come far, but there’s still much work left to do. The Senate majority has done its utmost to remain open and available to the public, and we encourage further input from our communities. I believe the policies we’ve put forth this session will benefit Alaskans for generations to come. We believe this is what our constituents sent us here to do, as well as what all Alaskans want and expect from their leaders.

We went into this session with a purpose. Our aim was to put Alaska on a bold, new course and we will not rest until Alaska’s oil production turns around, our communities have long-term, sustainable energy relief and government spending is under control.

Sen. Charlie Huggins has represented District E in the Mat-Su Valley since 2004 and is currently Senate president.