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Caelus' find still causing a buzz

Morning Headlamp, October 10, 2016


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Following last week's major news from Caelus Energy, the next round of debate surrounding Alaska's financial strategies and resource development has taken center stage.

 

In an editorial, The Fairbank Daily News Miner applauded the find but called the news "no silver bullet." According to the opinion, "Smith Bay won't fix the state's current revenue problems. Even if permitted, leased and developed with all haste, oil from the field wouldn't be flowing through the pipeline until the early 2020s, well after available state savings (including the Alaska Permanent Fund's earnings reserve, out of which dividend checks are paid) would be exhausted without new revenue measures. What's more, even at the top-end estimate of 200,000 barrels of new oil from Smith Bay flowing through the pipeline, the new field's production tax revenue and royalty oil wouldn't close the budget gap on its own; the state would still be operating at a significant deficit." 

 

AOGA executive director Kara Moriarty also wrote on Alaska's fiscal plight, specifically with regards to potential taxes on the industry. In an ADN op-ed, Moriarty argues, "If producer taxes were increased yet again, where would that money come from? Brena suggests that the industry can easily afford $3 billion in new taxes. Here's the harsh reality: At these oil prices, paying any additional tax will force companies to cut their spending in Alaska and a $3 billion increase will cause massive reductions in capital and operating expenses. That leads to less oil production in the short term and virtually guarantees rapid oil production declines in the future. Any reduction will cost many more Alaskans their jobs."

 

Caelus Energy Alaska executives said the state should do what it can to support small, independent oil companies like Caelus to help diversify North Slope oil production which has long been dominated BP, ExxonMobil and ConocoPhillips. Musselman also said if the North Slope net-operating loss credit bill is reintroduced and passed by the Legislature, the Smith Bay project is dead. "Nothing gets done under 5005," said Musselman, referring to the Senate bill's number.

 

Can't win 'em all. Finally, the Center for Biological Diversity announced it will work toward stopping the proposed offshore development about 50 miles southeast of Barrow. "More drilling and fracking would harm polar bears, ringed seals and other imperiled wildlife in the region," said Miyoko Sakashita, oceans program director for the group. "Between the impacts to our climate and Alaska's wildlife, it's clear to us this project should never move forward. We intend to fight it." Headlamp is always amazed by the individuals who spend their time fighting jobs and a strong economy, ignoring the responsible resource development that has supported Alaska for years. 

 

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First Reads

New oil find no silver bullet: Smith Bay field will benefit state, but doesn't fix revenue problem
Fairbanks Daily News Miner, October 9, 2016

'Tax the oil companies more' is not the answer to Alaska's fiscal plight
Alaska Dispatch News, Kara Moriarty, October 9, 2016

Polar bears, fracking and a vow from a conservation group to fight Caelus at Smith Bay
Alaska Dispatch News, Alex DeMarban, October 8, 2016

Company behind big oil discovery jittery about future of tax credits
Alaska Dispatch News, Alex DeMarban, October 8, 2016

AK Headlamp
A project of the Alaska Support Industry Alliance
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Anchorage, AK 99503

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