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Alaska cuts taxes to spur oil developments

April 21, 2013

The State Legislature has cut taxes on oil production by approximately $750 M per year to spur investment in new production. The reduced take to the State amounts to $3.5 B over 5 years.

The Prudhoe Bay field in Alaska remains the largest oil field in North America, with four of the top 10 producing oil fields existing on the North Slope.

• Alaska’s waters are believed to contain more than 30 percent of the nation’s known recoverable offshore resources.

• Alaska’s oil and gas industry has produced more than 17 billion barrels of oil and 13 billion cubic feet of natural gas.

• The Trans-Alaska Pipeline System (TAPS) is operating at only one-third of its capacity, and there has been a 39 percent decline in the past 10 years.

• Furthermore, production has dropped 68 percent since hitting a peak of 2 million barrels per day in 1988. It currently produces about 600,000 barrels per day. However, only one exploration well was drilled in 2011.

The petroleum industry supports one-third of all Alaska jobs, generating 110,000 jobs throughout the state.

Brad Keithley, an energy tax guru, has posted an excellent piece ( see source c below) on the Internet which succinctly describes the dilemma facing Alaska. Production is declining yet the major producers are reluctant to invest in light of pernicious State taxation under the ACES Act. His tax solution contains 5 elements:

In the last ten years Alaskan oil production fell by 44%. Meanwhile Texas production has doubled and North Dakota has increased 8 fold. North Dakota produces more oil than Alaska now, while ten years ago that state produced only 8% as much as Alaska.


Alaskans have been riding the North Slope gravy train for a generation, but the oil is running out. Keithley makes valid points.

More the likely the recent State tax cuts will fall short likely. Competitors take proportionally less. The state has massive oil (and gas) potential, yet Alaska is a very expensive place to drill for oil. 

Alaska has no State income tax or sales tax - perhaps these need to be added to the conversation.