Alaska should bank on oil with caution

Posted: Tuesday, June 08, 2004

(Last) Tuesday's announcement of the total revenue from the latest lease sale in the National Petroleum Reserve-Alaska certainly is beneficial to the state. Alaska's share, taken in a 50-50 split with the federal government, will amount to nearly $27 million and should be in the bank in the next couple of months.

But the longer-term revenue prospects from this sale remain uncertain, due to the general nature of the business buying a lease doesn't guarantee that oil and gas actually will be found in the hoped-for quantity; just ask British Petroleum, which last year decided to shut down its once-promising Badami field east of Prudhoe Bay. Badami was expected to run for many years when it went into production in 1997, but daily output fell far short of the goal.

There is a sense of optimism, though, in this latest sale. Several of the top bids were for tracts near a vein well known to oil geologists.

Even so, this latest move to develop a portion of the NPR-A is the subject of a lawsuit that could delay

development at least one year, and maybe more, beyond the 2009 estimate that state officials spoke of in making their annual spring revenue forecast in April. The distant date is due largely to the absence of industry infrastructure, which would have to be built.

Lawsuits against big projects come with the turf; that's just the way it is. Alaskans have seen it twice in recent weeks, first with the Pogo gold mine outside of Delta Junction and now with the federal government's decision to allow development in the petroleum reserve's northwest region.

Delays and disappointments, whether in the NPR-A or elsewhere in the oil patch, do affect the state. With NPR-A, Gov. Frank Murkowski's budget experts have factored oil income into their long-term budget outlook.

Is there something to be learned here? You bet. For all the talk by politicians that oil revenue can help Alaska's budget problem, they can't guarantee that the money will flow. Economics, legal action, politics and the earth itself can quickly gum up a well-meaning sentiment.

Fairbanks Daily News-Miner

June 3

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