AJOC EDITORIAL: Game over for Wielechowski

  • Former state Sen. Hollis French, right, and Sen. Bill Wielechowski said they’d drop calls for changes to Alaska’s oil taxes if more production and revenue were achieved under Senate Bill 21. (Photo/Becky Bohrer/AP)

If Sen. Bill Wielechowski is true to his word, we’ve heard the last from him about changing Alaska’s oil taxes.

Back on June 10, 2014, Wielechowski and now-former Sen. Hollis French (who Gov. Bill Walker appointed to the Alaska Oil and Gas Conservation Commission last year) issued a “very simple challenge.”

“If SB 21 produces new oil, even ONE additional barrel, and this production results in increased revenue to the state, even ONE more dollar we will drop our support for revising oil taxes,” Wielechowski said.

The legislation proposed by Wielechowski and French called for the previous system known as ACES to be retroactively implemented in 2019 “if there is not one new barrel of oil produced compared to the 2013 TransAlaska Pipeline moving average of 531,000 (approx.) and total oil revenues from 2014 to 2018 are not any greater under SB 21 than they would have been under ACES.”

Whoops.

On Oct. 25 in Juneau, state Revenue Department officials released a revised production forecast for the current fiscal year of 533,000 barrels per day.

That’s 1,999 barrels more than needed under Wielechowski’s and French’s challenge and by the time the fiscal year ends next June 30 it could be plenty more.

We’ve yet to reach the peak production months on the North Slope, yet in September the daily rate was 512,000 barrels per day compared to 474,000 per day in September 2016.

So far in October, the daily production is 537,000 barrels per day compared to 525,000 per day in the same month last year.

This puts the North Slope on track for its third straight year of production increases in the four full fiscal years that Senate Bill 21 has been in place despite the fact prices have cratered from about $112 per barrel when it passed to as low as $26 per barrel in January 2016.

Meeting the revenue half of the Wielechowski-French challenge is even more of a layup.

Nobody, not even the Democrats, disputes that SB 21 has collected more production tax revenue than ACES would have at the prices from 2014-18. ACES would have collected zero production taxes at prices less than $63 per barrel, which we haven’t seen since the first quarter of 2015. The revised price forecast doesn’t expect prices to cross the $63 threshold until 2020.

That represents hundreds of millions more in revenue under SB 21 versus ACES.

Game over.

Early indications are Wielechowski has either forgotten about the gauntlet he and his former Democrat colleague laid down or doesn’t intend to abide by it.

He was tweeting the day after about how we haven’t reached former Gov. Sean Parnell’s goal of 1 million barrels per day and then turned his attention to the difference in production tax revenue versus the entirely separate subject of oil tax credits.

Sarah Erkmann Ward of the Alaska Oil and Gas Association offered a kill shot to Wielechowski’s million-barrel reference when he claimed Parnell’s goal was entirely based on passage of SB 21 and not the potential production from the Arctic National Wildlife Refuge or the Outer Continental Shelf.

Ward promptly replied with the 2012 briefing note from the Department of Natural Resources, which clearly included ANWR and OCS as part of the 10-year goal to reach 1 million barrels.

We are now five years out from that briefing paper, and years 2-5 are of particular note:

“Increased infield production from legacy fields.”

Check.

“Development of smaller pools of conventional oil (Oooguruk, Nikaitchuq, and others); the North Slope is estimated to have “dozens” of such untapped fields ranging from 25 million to 350 million barrels”

Check.

“Production from the eastern North Slope, including Point Thomson, which will create economies of scale to explore and develop the eastern North Slope.”

Check.

Wielechowski has been hoisted by his own challenge, but his defensive and rather sad tweeting shows he remains without shame about how wrong he’s been on SB 21.

Moving from the pathetic to the laughable was Walker’s reaction to the production forecast:

“The Walker-Mallott Administration has been working closely with our industry partners to incentivize production, which is crucial to building a Stronger Alaska.”

Closely as in proposing several times to raise oil production taxes.

Closely as in vetoing $630 million in oil tax credits over two years that has slowed down or stopped multiple efforts at exploration and new production.

Closely as in threatening the operators of Prudhoe Bay for not bowing to his demands for natural gas marketing information.

Mallott, for his part, declared that oil would no longer be the sustaining driver of the economy, “not even close to what it has been in these first 50 years,” in a speech to the Southeast Conference in September 2016.

Meanwhile, the Nanushuk project by Armstrong Energy that could reach 120,000 barrels per day is going through permitting, as is Hilcorp’s Liberty OCS project pegged to reach 60,000 barrels per day.

Meanwhile, ConocoPhillips is developing its Greater Mooses Tooth 1 and 2 prospects that have combined potential of 60,000 barrels per day and the company also announced its Willow discovery in the NPR-A with potential for 100,000 barrels per day.

That’s up 340,000 barrels per day of production that could come online within or near Parnell’s 10-year window.

Wielechowski and Walker, who both campaigned to repeal SB 21 in 2014, should simply admit they were wrong and stop embarrassing themselves with claims to the contrary.

Andrew Jensen can be reached at andrew.jensen@alaskajournal.com.

Updated: 
10/27/2017 - 2:50pm

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