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Voices of Alaska: Oil industry crucial to Alaska economy

Posted: June 10, 2014 - 1:23pm

Only three legs support the Alaska economy: oil, the federal government and everything else.

That’s why oil tax reform is an Alaska problem, not an oil company problem. Oil companies can invest anywhere in the world, and they do. They take their investment wherever they can achieve the highest rate of return. If that is not Alaska, then it may be North Dakota, California, Indonesia or anywhere else in the world. To them it’s a simple choice: what is the lowest risk and highest return.

It’s not so simple for us.

Without oil, Alaska would look very different. According to the University of Alaska Institute of Social and Economic Research (ISER), an Alaska sans petroleum would be about half the size it is today — and totally dominated by the federal government.

That’s not a place I want to raise my family.

An oilless Alaska economy would be thin, seasonal and transient, not robust and well rounded. Much of the infrastructure we take for granted would never have been built — and personal income would be 10-20 percent below the U.S. average. In short, we would be small, spare and poor.

But we’re not — thanks to oil.

The State of Alaska has collected $157 billion (in today’s dollars) from oil since 1959, money that funds 90 percent of the state’s general fund.

Oil means we can spend more per resident — roughly double the U.S. average — yet keep the tax burden light on most businesses.

Fully two-thirds of the job growth since statehood is due to petroleum and today half of the jobs in Alaska can be traced to petroleum.

We have money in the bank, thanks to our oil revenues: $50 billion in the Permanent Fund, $12.4 billion in the constitutional budget reserve fund and $4.8 billion in the statutory budget reserve.

On a more personal level, oil revenues contribute about $25,000/year to a family of four through permanent fund dividends, a lower tax burden — $2,500 per capita — and extra spending, according to ISER.

It is virtually impossible to replace our oil dollars. To equal what we raise in oil revenues would require an $8,000/ounce tax on gold, a $4,000/person tax on visitors or a $40/salmon tax on seafood, according to ISER.

Or we can keep Alaska an attractive place to produce more oil and collect another $85 billion on the oil and gas wealth that we know remains in the ground. That includes a liquefied natural gas (LNG) project that requires a vital oil industry to be built.

The reason is that much of the known, proven gas on the North Slope is in the Prudhoe Bay field, which is an oil field. The oil and gas are produced from the same wells and the support infrastructure built for oil has to be maintained — at an ever-increasing cost — to support gas production. But the profit margins for gas are slim compared to oil so supporting the infrastructure just for gas would be difficult without the oil.

Last year the state took a giant step towards securing a long-term future for our state by passing oil tax reform. The new law only went into effect last January but already we see a renewed sense of optimism on the North Slope, fueled by large investment commitments by the industry. As ISER has calculated, an infusion of $4 billion in additional capital will result in 50,000 barrels of new oil per day, which means more state revenues and 60,000 oil patch jobs over 20 years.

This is great news for everyone — especially the state, our economy and our families. Alaskans are the true beneficiaries of more oil, which is why it is so important for Alaska to vote No on 1 on Aug. 19. A vote no will keep oil tax reform in place, which will help ensure a healthy Alaska for decades to come. A vote yes is a vote for bankruptcy.

James Udelhoven has been doing business in Alaska for over 40 years and is the founder of Udelhoven Oilfield System Services.

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KenaiKardinal88 06/11/14 - 09:03 am
Outstanding Comments

It's refreshing to hear how local businesses thrive in spite of over-reach by the Federal government.

Great article Mr. Udelhoven!

Raoulduke 06/11/14 - 06:44 pm
Ascue PFD figures?

A family of 4 receives about $25,000 yearly? Where? When? This would come to $6,250 each yearly.I know of no one that has had a check for anywhere near this figure. So! Is Mr.Udelhoven wrong about these figures,or is he a Lobbyist for the oil industry? The bottom line is.Juneau sold out the citizenry of Alaska to the oil industry long ago Through their graft,and corruption.PETRO-POLITIC'S = CORRUPTION. Alaskan's YOU can clean up this mess.If you really want.

Norseman 06/11/14 - 07:11 pm
....James Udelhoven has been

....James Udelhoven has been doing business in Alaska for over 40 years and is the founder of Udelhoven Oilfield System Services....

That about sums it up why his stance is pro oil. I for one am sick and tired of subsidizing the richest corporations this world has ever seen.
The bribes, greed, and corruption that the oil industry has done and is still doing to our state only benefits them, politicans, and those directly aligned with big oil.

This letter is merely another oil related company wanting to shill for big oil.

jford 06/11/14 - 07:36 pm
Udelhoven is making stuff up.

60,000 oil patch jobs? What baloney.

Oil and gas jobs total around 14,000 today, the highest it's ever been, and that was achieved under ACES.

Udelhoven says it's going to grow to near 5 times that amount? That's simply laughable.

As for investment, investment was 2 billion in 2007, and rose to 2.5 billion in 2012, according to Department of Revenue figures.

State forecasts predicted more capital investment in the oil patch, reaching $3 billion at the end of last year and $3.5 billion in 2014.

Those were forecasts made before the tax cut passed the Legislature. Udelhoven claims there will be 4 billion invested and somehow that's going to end up increasing employment beyond any sane or realistic projections.

Remember, the 3 and 3 and a half billion in investments only created 12 to 14 thousand jobs. Another half billion in promised investment is going to magically create 45 thousand more jobs? Doing what, hand carrying dollar bills to BP and Exxon's CEO one at a time?

Why do these oil tax cut supporters feel a need to exaggerate to the ridiculous levels ? Because they don't have any actual argument that stands up to scrutiny.

The oil companies make only a couple of dollars a barrel in Iraq yet they are investing and making no plans to leave.

According to Udelhoven, the oil companies would never do that. But they are doing just that.

In Alaska they make more than 10 times that amount.

It's simply a lie to state that the oil companies will leave Alaska if we don't give them free billions.

Repeal SB 21, stop the giveaway.

Vote out Parnell, vote out the Republican majority who wish to give this state over to corporate control.

It's our oil, it's not Parnell's oil to give away and it's not Udelhoven's oil to give away.

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