Want More Oil in the Pipeline, change the rules, speed up permitting and get serious about exploration on Alaska's North Slope.
As I watched the President of United States tout our energy production as a good thing, the song I started singing was "North to Alaska..North to Alaska..!"
But the sad song that is being sung up here now as oil production declines and oil and gas jobs disappear, is an old classic Rock and Roll song, here is how it goes,
"Another One Bites The Dust, ha ha Another One Bites The Dust... ha ha"
Sometimes I wonder if anyone is watching the same reports I am and wondering what happens when the oil runs out, or runs from somewhere else. I have been hearing reports that the United States is on its way to being the world's largest producer of oil by 2020.
Unfortunately, Alaska is heading in the other direction. So we really should be asking ourselves if we are going to be a part of the solution or become part of the problem? Are we going to become importers of energy in a state that has some of the richest resources and one of the smallest populations? Just how did we get here?
I think I can sum it up in one word, "fear". When the Exxon Valdez accident happened we succumbed to fear, perhaps a little justified, but our reaction was an over reaction. We were all very upset at Exxon (one of the biggest of the "majors") for soiling our great state that we set up a regulatory, permitting and bonding scenario that only the "majors" could meet. Thus we doomed ourselves to working with the very type of company that caused the problem.
At the same time, we have built our revenue models around oil, even giving our citizens a dividend on the production every year. Almost like taxing cigarettes to pay for healthcare. As the number packs being sold goes down, so does your subsidy. We assumed we were safe with the majors and oil would continue to flow. Well, now oil production was 593,298 barrels on November 12, 2012. Sounds like a lot until you realize that in 1988 the pipeline had over 2 million barrels a day traveling down it.
Our benefactors, the "majors" seem content to leave the oil in the ground and spend their money on low hanging fruit in someone else's garden. Yet, when smaller players express interest, after looking at our requirements they tend to shy away. Remember that word, "fear", and believe me no independent wants to get hit with a multi-billion dollar fine like BP.
Under Governor Parnell, the state has done some things right, in the Cook Inlet we have used the ACES program to attract some smaller players like Apache, Armstrong, Buccaneer Energy, Hillcorp, Miller Energy, Linc and a handful of others. We used the Stampede bill to attract some Jack-up rigs and that worked. But on the North Slope we still have that little word stopping us, "fear". Fear of a major spill caused by a small company that cannot afford to clean it up, so we stay with the companies that caused us to be afraid in the first place.
Here's an idea, let's self-insure and spread the risk. Not to beat a dead horse but Alaska has some sort of spill cleanup fund since 1976, currently it is capped at $50 million and it goes up and down depending on activities. Taking 5 cents off of every barrel produced and suspended when the fund hits $50 million funds it. Now, I am not saying that this is the answer, bond the smaller companies just using the $50 million.
Let's start streamlining the permitting process around here. In the Gulf of Mexico if you want to drill, you apply for your permits and within 30-60 days you got em. I have heard it is even faster in Oklahoma and North Dakota.
Alaska can change the rules and bring the smaller independents that drill in the lower 48 here. We can be a big part of what makes the United States the biggest producer in the world, and we could do it as a partnership between the State and the Independents. Let's look seriously at how much would need to be skimmed per barrel to eliminate the need for independent billion dollar bonds and use the 470 fund to clean up spills as they occur. Maybe that needs to be $1 or $2 but it wouldn't take much. Then don't put a cap on it and let it grow. Then if we have a spill take the perpetrators in front of a jury, and if they are at fault make them pay the fund back. If they can't pay up front, make them contribute more from their production but don't run them out of Dodge.
Lets get this permitting issue under control. Taking the better part of two years and over a million dollars to permit one small gas well on shore is insane. Other states can permit wells in a quarter of the time and have very good environmental and safety records. If we emulate Texas, Oklahoma, Louisiana, even California we can greatly increase our efficiency here.
Lets create a one-stop oil and gas agency that issues permits but isn't involved in enforcement. Let's have them work with the companies to get the job done, one spill plan that can apply to the entire region. Then amend it when something really changes. Then separately allow for "due process" if someone violates screws up, law enforcement can take action if required. If we are worried about transparency let's put all the hearings on the Internet streaming or put them on TV. By reducing the permitting time period by even a few months, the independents will be able to compete in this market and end the near monopoly the majors have on this state with 700,000 people with 25% of the nations oil. Our nation needs Alaska to get its act together.
If we make these changes, in addition to the changes we have all ready made the people in SouthCentral Alaska will have more high paying oil and gas jobs and have hope that this massive oil & gas decline will stop and maybe cause an increase in wealth for all the good people of Alaska.
If these Alaskan investors and smaller oil competitors are not priced out of business they will fill Alaska's near empty pipelines and provide a future where Alaskans don't have to pay the highest fuel cost in the nation and be in fear of a natural gas shortage causing Alaskans to freeze in the cold winter nights.
End the "fear".