State's finances hinder oil, gas

Posted: Thursday, November 11, 2004

Alaska's uncertain financial situation is the biggest hurdle to oil and gas development in the state, according Larry Houle, general manager of the Alaska Support Industry Alliance.

Houle said Wednesday that his organization, which represents more than 400 businesses and individuals in the oil field support industry, believes oil companies are becoming more reluctant to invest in Alaska because there is no long-term financial plan in place to deal with dwindling state revenues.

"There is a current and lingering fiscal uncertainty that is lingering out there," Houle said during the Kenai Chamber of Commerce's weekly luncheon at Paradisos Restaurant in Kenai.

State political leaders have grappled with crafting a long-term financial plan for the state for the past several years, as the state has seen revenues from oil and gas dwindle as production has decreased and the state's population has increased.

The urgency for such a plan has been mitigated somewhat over the past year by record oil prices, but Houle said there still is a need to develop a plan now.

Because Alaska is among the most expensive oil-producing areas in the world, Houle said it's imperative that oil companies see the state as being stable financially. He said the Legislature should make it a top priority to make a long-range plan as soon as possible.

"Without that fiscal certainty ... we see those oil companies could move elsewhere," he said.

Houle's comments on a fiscal plan followed comments regarding how optimistic his group is about the potential for oil and gas development in the state. He said Alaska still has enormous reserves available for development, and that the industry isn't going anywhere any time soon.

"Alaska will remain a world-class oil province," he said. "... We have every reason to believe oil and gas production will last for 60 years and beyond."

Houle said the current political situation in Alaska and Washington, D.C., makes it likely the state will remain a favorable area for development on the North Slope and elsewhere. He said that with Alaska having a strong presence in national politics along with President George W. Bush in the White House that are favorable to drilling, the future does look bright for development.

"We believe oil and gas development for the next 25 years looks pretty good. Pretty good after last Tuesday, in fact," he said, referring to the election.

However, Houle reinforced the point that unless the state's political leaders find a way to balance the state's budget for the long term, oil companies still may be reluctant to pour money into the state.

"We really do believe there's a threat, and that is a lack of fiscal certainty," he said.

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