A Citizen’s Guide

I’ve lived with my family in Fairbanks for 33 years and have been involved with the oil and gas industry for most of that time, mainly as an equipment operator in the International Union of Operating Engineers Local 302. I’m now working on the trans-Alaska oil pipeline at Pump Station 9, near Delta Junction.

I’ve been following the petroleum production tax debate in Juneau, and I’d like to offer a few comments as a longtime Alaskan who plans to remain here for a long time to come.

So far the industry has invested more than $50 billion in the North Slope, the pipeline, the Valdez terminal and other infrastructure to produce all that oil over the past 29 years.

The North Slope participants have generated $120 billion in taxes for Alaska and the federal government since first production in 1977 and have created more than 34,000 jobs in the state. The Alaska Permanent Fund is now up to about $30 billion.

You might not get a feel for the big investments made by the oil and gas industry unless you drive along the length of the trans-Alaska pipeline or visit some of the big fields on the North Slope—Prudhoe Bay, Kuparuk, Endicott—and see the huge infrastructure that’s been built up there. Big numbers in the billions are hard for most folks to grasp, but when you see all the installations and equipment that have been put into place to produce the oil—some 15 billion barrels now—you begin to understand the magnitude of the investments that have been needed.

I’ve rubbed elbows with hundreds of people who have been employed by the oil and gas industry over these three decades. I’ve met many of their families, and some of our kids have been friends. I know that our lives would have been entirely different, the state would be entirely different, without the pipeline and the North Slope oil fields.

I needn’t remind anyone how much Fairbanks has benefited from North Slope oil development, and if what industry says is true about identifying 17 billion barrels more recoverable resources on Slope, including natural gas, we have a bright and exciting future ahead of us—that is, if we get the tax structure right.

The way I see it, the question that should be asked by legislators in Juneau right now is not how much tax revenue can the state get by adopting a net profits system but how much future investment can we attract. The industry has proven that it’s committed to Alaska for the long haul—40 to 50 years, they’re saying. The fact that they’ve put so much effort into working with the state to build a $25 billion natural gas pipeline is proof of that.

Other oil-producing areas such as the Canadian province of Alberta, the North Sea, Trinidad, and the Gulf of Mexico have adopted tax policies that have encouraged investment and increased production. In a recent visit to Anchorage, Alberta’s oil minister described tax incentives that have spurred production of oil from tar sands—difficult oil to produce. He was quoted as saying that if young Alaskans can’t find jobs in the oil and gas industry, they should come on down to Canada. With the kind of resource potential we have in Alaska and the proven expertise of the industry here, I find that kind of statement rather insulting, and in some ways, sad.

Alaska’s oil production is declining at a rate of 6 percent a year even while the industry is investing about $1 billion to $1.5 billion per year. To reduce the decline to the 3 percent forecast by the Department of Revenue (2006), industry would have to double that investment. Every 100,000 barrel per day drop in production represents a drop in state revenues of about $500 million per year at current oil prices.

I have three children, and I hope that in the future they don’t have to leave the state to find job opportunities. A robust oil and gas industry will provide those opportunities.

Jim Plaquet has been a member of Operating Engineers Local 302 for 32 years and works for AES-PPC on the trans-Alaska oil pipeline.