Oil & Gas Legislative Update: Federal policies in the spotlight in 2019.
Although oil and gas tax policy conversations aren't making headlines in Alaska this year, they're ongoing. According to an op-ed by Alaska Oil and Gas Association (AOGA) President and CEO Kara Moriarty, "Given the tough budget conversation underway in our state, it's not surprising that some people are once again trying to put oil taxes in the spotlight." Alaska has seen more than seven oil and gas tax policy changes in the last fourteen years, and under the ACES tax regime oil production declined by approximately 169,000 barrels per day. With the passage of SB21 in 2014 and a relatively unchanging tax environment since, oil production stabilized and even increased, despite the plummet of oil prices during the same time period. According to Moriarty, "Thanks to significant investment focused on more production, North Slope production actually produced 518,000 barrels per day for fiscal 2018, an increase of 75,000 barrels per day over what had been predicted [in the fall of 2012]. More production means more revenue for the Permanent Fund and key essential services--a win for all Alaskans.
"We understand oil tax policy is complex and hard for even seasoned experts to understand. But the key takeaway is that our current tax structure is performing. While the state has huge issues to resolve this year, the standard oil tax fallback isn't the answer."
Fortunately Alaska's legislators aren't currently pushing oil and gas tax initiatives, but recent policies affecting the Alaska oil and gas industry have instead originated at the federal level, stirring both optimism and frustration regarding oil and gas exploration activities in the Last Frontier.
In a disappointing turn of events for those interested in offshore exploration, in March US District Judge Sharon Gleason issued a ruling that President Donald Trump's Executive Order 13795--an attempt to revoke then-President Barack Obama's decision in 2015 and 2016 to withdraw 125 million acres in the Beaufort and Chukchi Seas from oil and gas leasing--was unlawful, reinstating Obama's orders.
According to Alaska District Court Sets Aside Rulings Under New Administration's EO 13795 by Anthony B. Cavender, "Section 12 (a) of the OCSLA states that: 'The President of the United States may, from time to time, withdraw from any disposition any of the unleased lands of the Outer Continental Shelf.' However, there is no provision in the OCSLA that mentions revoking an earlier withdrawal. The District Court believed the language to be clear on its face, but since there may be some ambiguity in the law because of the use of the phrase, 'from time to time,' the District Court reviewed other laws, rulings made by the attorney general over the years, and the Act's legislative history, and concluded that the president was without authority to revoke these earlier presidential actions, which perforce, 'will remain in full force and effect unless and until revoked by Congress."
Governor Mike Dunleavy voiced his disappointment at the ruling, stating, "Alaska's potential offshore oil and gas deposits, if given the opportunity to be safely and responsibly developed, can create jobs, revenue, and economic opportunity for decades. One president should not have the power to lock up Alaska's resources in perpetuity."
This sentiment was echoed by US Senator Lisa Murkowski, who said: "I strongly disagree with this ruling, which asserts that past presidents can bind their successors and only Congress can overturn those decisions... That is not the correct interpretation of the Outer Continental Shelf Lands Act and could have catastrophic impacts for offshore development, which creates jobs, generates revenues, and strengthens our national security. I expect this decision to be appealed and ultimately overturned--if not by the Ninth Circuit, then by the Supreme Court."
Joe Balash, assistant secretary for land and minerals management for the US Department of the Interior, stated during a presentation at the AOGA Conference in late May that an appeal of the ruling was filed and legal briefs were being prepared.
According to Balash, the ruling impedes an "ambitious" five-year plan to make more of the Outer Continental Shelf (OCS) available for leasing countrywide. "Unfortunately, Judge Gleason handed us a decision that has really compromised our ability to bring a lot of new resources to the table here in Alaska," Balash said. "Taking the entire Chukchi [Sea] Planning Area off the table means the bang-for-the-buck here in the Alaska region is not what we had really been counting on ... We have a lot of work in front of us before we're going to know exactly what the future holds here for the Arctic OCS," he stated.
What's particularly disheartening is that the potential for oil and gas development in offshore Alaska is both known and significant. In an editorial roundtable discussion with American Petroleum Institute President and CEO Mike Sommers, he explained, "One of the things that we know through all the testing that's already been done in the Beaufort and Chukchi Seas is that resource is tremendous, and we actually would expect, once those resources are developed, that it's going to be more oil in that area than we've seen in the Atlantic or Pacific combined."
According to the US Department of the Interior, the Beaufort Sea and Chukchi Sea together contain an estimated 23.6 billion barrels of oil and more than 104 trillion cubic feet of natural gas. According to a release from Murkowski's office, "Responsible development in the Arctic could also help states such as California reduce their foreign imports, which have grown significantly as Alaska production has declined."
Sommers continued on to say that this decision about OCS exploration in Alaska also has a direct effect on oil and gas exploration in the Lower 48, delaying work on the Trump Administration's five-year plan for the Gulf of Mexico and the Atlantic until the issue has been resolved in court. "We're hopeful that the appeal is successful and we can get that issue behind us and start continuing to provide the energy security that American consumers expect," Sommers stated.
On the other end of the spectrum, at the end of 2017 a decades-long struggle to open the Arctic National Wildlife Refuge (ANWR) for oil and gas development came to fruition as 1.5 million acres in the 1002 area along the coast were made available for leasing for energy exploration, spurring optimism in the industry. And though that was a significant milestone capping the hard work of many Alaskans, it was just the beginning of the process for development in ANWR.
During his presentation at the AOGA Conference, Balash explained that the opening of ANWR coincided with his confirmation to his current position. "And the reward for that was the Secretary sitting me down on my second day and saying, 'Guess what? Congress has given the department a new job, and it is now your personal responsibility to make sure we have a lease sale.'"
So far Balash is succeeding in moving the process forward, as the US Department of the Interior published a Draft Environmental impact Statement (EIS) in December and completed gathering public feedback and comments on that document in March. "We received more than a million comments" regarding the issue, and "after going through and coding the comments, there were about 2,500 specific issues that were raised in those comments that we have to address," Balash reported.
In May, Balash spoke with Canadian government officials to address their concerns about the Porcupine Caribou herd--protected by a US/Canada treaty, the herd migrates more than 1,500 miles every year between their winter range and calving grounds, spanning from the north coast of Alaska to the Yukon in northwest Canada--meeting an obligation on the department's part to consult with the Canadian government about the herd.
Balash anticipates a final EIS, which will include any necessary changes stemming from public and key stakeholder feedback, will be published by the end of this summer. "Once we have a final EIS, we'll be in a position to issue a record of decision and notice of lease sale, and that lease sale will happen in 2019," Balash announced to a round of applause.
"A number of people in this room spent time traipsing back to Washington DC to testify and support and try to convince people that yes, [ANWR] is a place that we can develop oil and gas and we can do it without upsetting the balance of wildlife that many people depend on," Balash said. "I can tell you from the work that I do in other states with other delegations, even when there's a unified perspective on the question of development, there's not always a unified voice: there are competing agendas, competing voices as to how we should go about doing things. [But] when it comes to Alaska, there's no daylight between our members, and that makes all the difference in the world when we're trying to advance things that further Alaska's future."
By Tasha Anderson
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|Title Annotation:||OIL & GAS|
|Comment:||Oil & Gas Legislative Update: Federal policies in the spotlight in 2019.(OIL & GAS)|
|Publication:||Alaska Business Monthly|
|Date:||Jul 1, 2019|
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