Industry leaders say a “renaissance” is underway on the North Slope. Major projects are well on their way to production, and oil companies say they’re planning to expand even further, helping to reverse a long-running decline in production in the Arctic.
Construction is well underway on high-profile oil development projects like ConocoPhillips’ Willow and Santos and Repsol’s Pikka. Both of those stand to substantially boost the amount of oil flowing south.
At the Alaska Oil and Gas Association’s annual conference last month, ConocoPhillips’ Donald Allan said Willow remains on track to start production in 2029.
“It's a super exciting time for Alaska,” he said. “We have big projects happening right now. We have a whole new play ramping up, and there's more to come with our exploration season and future projects.”
Meanwhile, Santos VP of Business Development Peter Laliberte shared the news that the Pikka project is running months ahead of schedule and is more than 90% complete. It’s on track to produce its first barrel of oil in the first quarter of next year, he said.
“Once we start up, we'll ramp up about mid-year,” he said. “We'll ramp up to 80,000 barrels a day, and by then, we're going to be looking on for the next project.”
An additional 80,000 barrels a day would boost North Slope production by nearly 20% from where it is right now.
What does that mean for the state’s economy — and the state’s stretched budget?
“I look at it as all positive,” said Sitka Republican state Sen. Bert Stedman, one of the top budgeters in the state Legislature. “Quite frankly, this is just the beginning. There's going to be probably a decade of build-out going on on the Slope.”
It’s a boon for the economy, he said, and a welcome source of relief for the state budget. Pikka — which, importantly, is on state-owned land, and thus generates more state revenue than projects on federal land — is likely to yield more than $200 million for the state in its first year, according to an analysis from the state revenue department.
That’s a significant, though not life-changing, chunk of change for the state, Stedman said. For comparison, the education funding boost lawmakers approved this session cost about $170 million.
“It's not going to be, you know, you're in euphoria because you have massive surpluses in your budget or anything like that, but it's definitely positive,” he said. “You want to take multiple steps like this forward, then they all add up to definitely helping the state balance its budget.”
Higher-than-expected oil prices are also providing a lift to the budget, he said.
Sen. Bill Wielechowski, an Anchorage Democrat, said the surge in North Slope activity is, indeed, good news. But not as good as it could be.
“Absolutely, $200 million, of course, happy to see it. It will help the budget,” he said. “But when you compare it to what other jurisdictions are getting, it is nowhere near what we should be getting.”
He pointed to oil-producing states like Texas and North Dakota, which have substantially higher tax and royalty rates than Alaska. Of course, the fact that most of Alaska’s oil comes from the remote North Slope, where costs are high, complicates the picture.
“We can't even afford to fund our schools. We've got schools falling in the ocean. We've got communities that still have honey buckets. We can't maintain our roads, we can't plow our roads,” he said. “We have colossally mismanaged our oil wealth in the state of Alaska.”
Wielechowski said lawmakers should make changes to the state’s tax and royalty system to take advantage of the surge in activity. For one thing, he said he’d like to prevent companies from deducting investments on federal land — like Willow — from the state taxes they owe on other projects. State revenue officials recently cut the state’s projected income from Willow by half.
“Why should we subsidize that?” he said. “Why should the state of Alaska be subsidizing hundreds of millions to billions of dollars for production, for exploration costs, drilling costs, for which we get zero royalties, for which we get very little in production taxes?”
Wielechowski has backed a number of bills that would stiffen the state’s oil and gas taxes, though they have yet to advance to a final vote.
