In the Capitol this week, the newly-formed Senate TAPS Throughput Committee is analyzing our state's troubling oil production decline.
Gone are the days of 2 million barrels per day flowing down the line. Instead, Alaska faces the stark reality of a steady 6 percent decline, with the flow now standing at less than 560 thousand barrels per day. The decline is not because Alaska is running out of oil; it is because we are running behind the competition.
High oil prices, combined with low natural gas prices, have expanded industry investment in oil exploration and production, but not in Alaska. Alaska has dropped behind North Dakota in production, and we are now at risk of falling behind California.
Alaska's oil tax regime at these high prices is a major reason for the declining TAPS throughput.
I recently introduced a bill to get more of Alaska's fair share of production by making Alaska"s tax regime more competitive.
My legislation adheres to four guiding principles.
Tax reform must be fair to Alaskans.
Tax reform must encourage new production.
Tax reform must be simple, so that it restores balance to the system.
Tax reform has to be durable for the long term.
The bill I transmitted to the Legislature better protects Alaskans at lower oil prices. It substantially reduces the risk to the state treasury by not having to pay the companies $1 billion dollars next year for those tax credits. It simplifies the system by maintaining the flat tax rate of 25 percent, eliminating the monthly "progressivity tax," and restructuring tax credits. The legislation encourages new production by focusing our incentives on actual oil production, not just spending alone.
I look forward to the testimony this week in the Senate Throughput Committee, and I look forward to working with legislators, on both sides of the aisle, to reverse the decline, make Alaska more competitive, and create opportunities for Alaskans.