Alaska official says oil future stable
Prices for Alaska's main money source — oil — have stabilized following a volatile year, and a state official on Thursday predicted a smaller drop in revenues than expected.
"What a difference a year makes," said Revenue Commissioner Pat Galvin, who released the 110-page revenue forecast.
Galvin said oil prices are expected to be in the $67-per-barrel range in the 2010 fiscal year that ends June 30.
He predicted $4.8 billion in unrestricted revenue, the money pool that generates most of the legislative and public debate. That's $1 billion less, however, than was generated in the last fiscal year and less than half of the record $10 billion in the previous year.
Galvin said oil and gas production is expected to account for about 87 percent of state revenues over the next decade, compared with 89 percent last year and 93 percent in 2008.
The outlook was released days before Gov. Sean Parnell releases his proposed budget next week.
While lower revenues are predicted, they are higher than the $3.2 billion expected in a spring forecast near the end of a tumultuous year. Oil prices started at about $130 per barrel, plunged to $38 and then topped off in the $70 range.
Despite the sharp fluctuations, unrestricted revenues totaled $5.8 billion in fiscal year 2009.
"Certainly, the higher revenue in the first part of that year contributed to the higher overall revenue," said Jennifer Duval, a state petroleum economist. "We also saw prices come back up in the latter part of that year."
Oil dominates revenue sources, but production on Alaska's North Slope is still declining.
Production fell more than 3 percent last fiscal year, and another decline of nearly 5 percent is expected in the current fiscal year, according to the forecast. Daily oil production is expected to average 659,000 barrels, compared with a record of more than 2 million barrels a day in 1988. Daily production is expected to dip to 623,000 barrels in 2011, with prices rising to more than $76 per barrel.
Galvin said a spike in production is expected starting in 2012 with completion of new projects including Point Thomson, a large oil and gas unit 60 miles east of the Prudhoe Bay oil field. Some oil companies, however, blame the state's oil tax laws for pushing them to invest elsewhere in the world.
Parnell has ordered a review of the tax system, known as Alaska's Clear and Equitable Share, or ACES, which was passed by lawmakers in 2007 at the urging of former Gov. Sarah Palin.
State Rep. Mike Hawker, R-Anchorage, co-chair of the House Finance Committee, said the projected price of oil for 2010 and 2011 are reasonable and realistic. He said he's confident the state is in better shape financially and won't have to tap any state savings accounts.
But the production increases forecast for later years are troubling and overly optimistic given the industry's push against ACES, said Hawker. He is among 15 Republican lawmakers who signed a recent letter expressing their concerns to fellow Republican Parnell, who defended the tax system.
The forecast predicts new production will account for more than 18 percent of all production in 2012, increasing each year to more than 47 percent by 2019.
"It seems inconsistent with the reports we're getting from the industry itself of not having an economic climate in Alaska necessary to attract the capital investment from these international companies," Hawker said. "That somehow seems inconsistent with this miraculous increase in new production."