Focusing on Alaska’s Economic Future Oil & Gas Competitiveness Review Board Alaska State Senator Lesil McGuire
Oil and Gas Competitiveness Review Board • Why we created the Review Board • Composition of Review Board • Duties of Review Board Whaley, Frank H. photo. AMRC. Wien Collection http://www.alaskadispatch.com/article/20130819/alaska- asks-oil-companies-help-write-rules-oil-tax-cut
Oil and Gas Competitiveness Review Board Sec 30. AS 43.56.160 • Established 2013 • Creates a Board modeled after Alberta http://www.downstreamtoday.com/news/article.aspx?a_id=21965
Why We Created the Review Board Alaska Relies on Revenue from Oil and Gas Alaska Must turn the decline of Oil production around Other jurisdictions have stepped up efforts to attract investment Oil and Gas production is dependent on capital investment
Why We Created the Review Board Three possible future scenarios: Each outcome is due to different levels of investment Source: 2006, http://www.akrepublicans.org/houres/24/pdfs/houres_hb488_12.pdf
Why We Created the Review Board • Alaska’s oil and gas economy does not exist in a vacuum • Oil and gas companies have many options when deciding where to invest capital and resources • Alaska MUST remain competitive in the Global Market http://www.alaskadispatch.com/article/npr-lease-sale- federal-flop
Why We Created the Review Board • Oil and gas investments made today will have lasting impacts on AK’s standard of living • Alaska’s ability to attract investment will determine our future fiscal regime
Why We Created the Review Board • Alberta saw a similar decline in oil and gas production • They established a Council to execute a holistic study of oil and gas investment competitiveness • They successfully turned around the decline of production • Alaska must also adapt to changing market conditions
Why We Created the Review Board Meanwhile, AK North Slope Production has continued to decline http://gov.alaska.gov/parnell/priorities/resources/fill-the-pipeline/fill-the-pipeline-background.html
Why We Created the Review Board In the Spring of 2013 Alaska fell to 4 th among the US oil producing states - falling behind Texas, North Dakota, and California. • Alaska’s decline is not because we are running out of oil • It is because we began to fall behind the competition for new investment
Why We Created the Review Board 2013 Source: AK DNR & AK DOR
Why We Created the Review Board Other basins have turned decline around This is how Alaska did During an all time price spike in WTI price While other jurisdictions improved production during record prices, Alaska’s production continued to decline Source: AK DNR and AK DOR
Why We Created the Review Board • Alaska needs a comprehensive mechanism to assess our global competitiveness • A competitive oil and gas industry creates jobs across sectors. It means a vibrant economy • In 2010 oil and gas accounted for – 44,800 jobs (direct and indirect) – $2.65 Billion in payroll http://www.downstreamtoday.com/news/article.aspx?a_id=38624
Why We Created the Review Board • Objective – Comprehensive review of Alaska’s competitiveness – Better informed Agencies – Better informed Legislature – Stability for industry http://www.pennenergy.com/index.html Long-term stability for Alaska
Oil and Gas Competitiveness Review Board Composition of the Board • Designed to be inclusive • Consists of 11 members • Will meet 1 time per year http://dnr.alaska.gov/commis/pco/taps.htm
Oil and Gas Competitiveness Review Board Composition of the Board • 2 members nominated by two leading nonprofit trade associations that represent the Oil and Gas Industry – Appointed by Governor • 1 member- the Chair of the Alaska Oil and Gas Conservation Commission or chair’s designee
Oil and Gas Competitiveness Review Board Composition of the Board • 3 members of the Public appointed by the Governor – A petroleum engineer – A Geologist – A financial Analyst https://www.downstreamtoday.com/projects/project.aspx?project_id=119
Oil and Gas Competitiveness Review Board Composition of the Board • 1- the Commissioner of Environmental Conservation (or Commissioner’s designee) • 1- The Commissioner of Natural Resources (or Commissioner’s designee) • 1- Commissioner of Revenue (or Commissioner’s designee)
Oil and Gas Competitiveness Review Board Composition of the Board • 2 members of the public who do not represent the oil and gas industry – Appointed by the Governor • Every 2 years the Governor shall designate one member as chair • Members shall serve for 4 years
Oil and Gas Competitiveness Review Board The Duties of the Board http://breakingenergy.com/2012/02/29/alaskas-oil-windfall/
Oil and Gas Competitiveness Review Board Duties • Establish and Maintain a collection of information related to oil and gas: • Exploration • Development • production • Related to: • Tax structure, rates and credits • In the State of Alaska • In OTHER jurisdictions
Oil and Gas Competitiveness Review Board Duties • Review historical, current and potential levels of investment in the State’s oil and gas sector • Identify factors that affect investment in oil and gas industry, including: – Tax structure, rates, credits – Royalty requirements – Infrastructure, workforce availability – Regulatory regime http://www.americasquarterly.org/po Photo: Bob Kirst/Corbis wer-shift-energy-western-hemisphere
Oil and Gas Competitiveness Review Board Duties • Review the competitive position of the state to attract and maintain investment in oil and gas sector • Compare this to the competitive position in other jurisdictions • Make written findings to the Alaska State Legislature
Oil and Gas Competitiveness Review Board Conclusion • Fiscal systems are not the only criteria Industry uses to make investment decisions – Operating costs – Economic and political stability – Regulatory regime • Alaska’s position in the Global market will not remain static – Alaska needed a mechanism to assess it’s global competitiveness in order to attract investment
Oil and Gas Competitiveness Review Board Conclusion • Maximizing Alaska’s energy resource potential requires the articulation of a log-term vision for development • It must be: – Forward focused – Stable – Globally competitive http://news.nationalgeographic.com/ne – Responsive to technological change ws/energy/2013/04/130409-alaska-oil- industry-taxes/
Oil and Gas Competitiveness Review Board Conclusion • Alaska has abundant unconventional oil and gas resources • Alaska must be positioned to develop these resources or face continued erosion of the overall market share http://www.energyandca pital.com/articles/oil- shales-real-enemy/2791
Oil and Gas Competitiveness Review Board Conclusion • By making written recommendations to the Alaska State Legislature the Board – Modernizes the way Alaskans look at the oil and gas industry – Positions the state to maximize oil and gas opportunity for all Alaskans http://www.aiche.org/about
Focusing on Alaska’s Economic Future Oil & Gas Competitiveness Review Board Questions? Alaska State Senator Lesil McGuire ● 907.465.2995 ● sen.lesil.mcguire@akleg.gov Picture: http://sockeyebusinesssolutions.com/index.php/industries/oil-gas
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