Lower revenues, oil production now estimated
JUNEAU — The state Department of Revenue issued its spring oil revenue and production forecast Friday and is projecting lower North Slope oil petroleum revenues and production than were estimated in the fall forecast issued last December.
A decline of almost $300 million in revenues is now projected for the 2014 fiscal year that begins July 1. Legislators in Juneau are just finishing work on the state budget for the year and will have to take the reduced revenues into account.
Most of Alaska's production is from the North Slope, which has been declining at about 6 percent annually for several years. A small amount of oil production comes from Cook Inlet.
For the current fiscal yea, the forecast lowered the expected average daily North Slope production from 552,800 barrels per day estimated in December to 538,300 b/d in the forecast issued Friday. The estimate is for Alaska’s current fiscal year that ends June 30, Alaska’s Department of Revenue said in the forecast.
For FY 2014, which begins July 1, forecasted production for the North Slope was lowered to 526,200 b/d from 538,400 b/d that was estimated in December. Additionally, about 10,000 b/d is produced in Cook Inlet and this amount is not expected to change over the forecast period, the department said.
The state revenue department does two oil revenue and production forecasts yearly, one in December and one in the spring, usually in early April, as the Legislature completes work on the budget.
State revenues, 90 percent of which are paid by oil taxes and royalties, are also expected to decline over the next two years compared with projections made in December.
State general fund revenue is now expected to be down $35.3 million, or 0.5 percent, for the current FY 2013. Revenues for FY 2014, however, are expected to be down $289.2 million, or 4.3 percent, compared with the December estimates.
The Department of Revenue forecast Alaska North Slope crude oil prices to remain generally steady at an average of $108.67 per barrel through the rest of this fiscal year and $109.21 per barrel over the next, the report indicated.
"Our production is down, but we've been able to mask part of that effect because oil prices have held steady. However, the continued decline in production has become more troubling to us," Deputy Revenue Commissioner Bruce Tangeman said.
The revenue decline for the current year would have been more substantial had the state not seen an increase in investment revenues to offset some of the decline in oil production income, Tangeman said.
Alaska's general fund revenue is now expected to total $7.5 billion in FY 2013 and $6.7 billion in FY 2014. In comparison, general fund revenue for FY 2012, the fiscal year ending last June 30, totaled $9.5 billion.
Alaska Gov. Sean Parnell is hoping to stem the decline in oil production with an overhaul of the state's petroleum production tax, which the governor says is too high and discourages investment.
A bill lowering the tax has passed the state Senate and is now in the state House.