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Senate passes SB 21



Senate does it! Passes SB 21

The Senate Majority, headed by Senate President Charlie Huggins, stated: "We cannot continue to sit idly by and watch other areas in the globe prosper while we start shutting down and closing our doors for business."

‘Alaska in a long-term relationship with oil industry’

MACC Steering Committee member Jim Johnsen discusses the need for a balanced, long-term relationship with the oil industry in a letter published by the Fairbanks News-Miner.

The state of Alaska is in a long-term relationship with the oil industry. Like it or not, it’s a relationship we depend on for the economic foundation of our state. Jobs, roads, schools, parks, public safety, fish and game — all in some way, to a greater or lesser extent, depend on the revenue we get from our partners in the oil industry.

Click here to read the full letter.

After hours of sometimes emotional debate, the Alaska Senate passed an amended SB 21 on a vote of 11 to 9 Tuesday night.

“The Senate, through SB 21, intends to put more oil in the pipeline. SB 21 will achieve this goal by putting in place an oil tax system that is fair, stable, predictable, durable, balanced and free from complexity across a wide range of oil prices,” the Senate Majority said in a statement.

Gov. Sean Parnell applauded the Senate’s action.

“For three years, Alaskans have watched from the sidelines as competing jurisdictions eclipsed our state in terms of oil production and industry investment. Alaskans sought a fair and competitive oil tax system that brings new jobs and investment in the oil-rich North Slope. Today, the Senate took bold action to increase production and fill the pipeline. I thank them for heeding the concerns of Alaskans, for understanding the urgent need for reform and for acting in the interest of Alaska’s long-term prosperity,” the governor said.

The Senate Majority said the bill creates a competitive system “by balancing the relationship between the capital credits and the progressivity to create a system that incentivizes production rather than spending.”

SB 21 eliminates progressivity but increases the base tax rate from 25 percent to 35 percent with a $5 per barrel credit. The only amendment to pass Wednesday was a Majority-backed measure that deleted a provision to lower the base tax rate to 33 percent in 2016.

“The 35/5 system provides a consistent share between government and industry across a wide range of oil prices,” the Majority said. “When prices are higher, the people of Alaska and the producers receive more per barrel, however, the people receive a slightly increasing proportion of the revenue as oil prices rise.”

Voting in favor of SB 21:
Sens. Click Bishop, John Coghill, Mike Dunleavy, Fred Dyson, Anna Fairclough, Cathy Giessel, Charlie Huggins, Pete Kelly, Lesil McGuire, Kevin Meyer and Peter Micciche.


  Memorable quotes

"This vote is a courageous move for Alaska's future.

- Sen. Anna Fairclough

"We are making significant progress toward Alaskans' goal of attracting new investment, encouraging increased production and restoring our standing as America's great oil province."

- Gov. Sean Parnell


“The time to act IS today. The dangerous gamble would be to stick with the system that we have today, this ACES system, which is broken. It has failed to yield new production and new investment.”

- Sen. Lesil McGuire


BP production down 9.1 percent

Northstar and Endicott produced 11,000 bpd in 2012, down 35 percent from 2011

According to Petroleum News Alaska, BP produced some 139,000 barrels of oil per day (bpd) in Alaska in 2012, down 9.1 percent from some 153,000 bpd in 2011 after dropping 7.8 percent between 2010 and 2011.

The declines came largely from smaller properties. The Prudhoe Bay field produced 77,000 bpd in 2012, down 1.3 percent from 2011, while Milne Point produced 15,000 bpd in 2012, down more than 21 percent from 2011, and “other fields” including Northstar and Endicott produced 11,000 bpd, down 35 percent from 2011.

Alyeska using pump stations to heat oil

Steep declines in production have resulted in crude traveling slower through the pipeline, allowing it to chill, which creates serious problems. Alyeska is using idle pump stations to keep oil heated during cold winter months

A trans-Alaska oil pipeline pump station, mothballed because of plummeting throughput, has been converted into an oil heater to help keep the line operational during the winter.

“The fact is, we know about operating a pipeline in a cold, challenging arctic climate. We’ve done this successfully for the past 35 years. But it has never been harder than it is today,” wrote Tom Barrett, president of Alyeska Pipeline Service Co., in Alyeska’s January newsletter.

“With technical challenges from declining throughput, we are operating in new territory every day. Issues caused by declining flow – slower moving oil, more wax and water dropout, tank roofs to shovel – are becoming harder to manage in the cold winter months. We’re taking steps to address these issues and we will have to increase these efforts if flow continues to decline.”

Enter Pump Station 7, located approximately 50 miles north of Fairbanks. Alyeska has reconfigured it to add heat to the pipeline’s crude oil stream by using an existing “legacy” pump. The mechanical energy provided by the pump converts to heat energy through pressure reducing valves.

During recirculation, a portion of the crude stream passes through drag valves that produce a pressure drop to develop heat. That same crude oil then flows through a full head pump that adds more heat with friction and increases the pressure. The crude oil goes through yet another drag valve, dropping the pressure again and producing additional heat before the oil re-enters the pipeline.

MACC provides speakers to meet your needs

MACC can dispatch speakers to all parts of Alaska to talk to groups and employees about the need to meaningfully reform Alaska’s oil taxes. To schedule a presentation, contact Julianne at MSI Communications.


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