National Petroleum Reserve

[Deleted member 28227]

Interesting theory. Please continue.
The problem with the deal was Hilcorp wouldn't tell anyone how they were going to pay for it and the rating services were going to downgrade them. They ended up setting up an independent sub so when all those assets have problems, the sub can declare bankruptcy. Their partners in those assets are deep-pocketed majors who weren't (and still aren't) thrilled about the structure.

 

[BigHornRam]

Why would a millennial analyst in the industry be such a pessimist

Dow OG Index during my career...

View attachment 210166

View attachment 210173

Hard times makes you tougher.

 

[BigHornRam]

Interesting theory. Please continue.
The problem with the deal was Hilcorp wouldn't tell anyone how they were going to pay for it and the rating services were going to downgrade them. They ended up setting up an independent sub so when all those assets have problems, the sub can declare bankruptcy. Their partners in those assets are deep-pocketed majors who weren't (and still aren't) thrilled about the structure.

Interesting theory.

 

[SAJ-99]

Interesting theory.

Just following the money and applying Hilcorp's track record for leaving the mess for US taxpayers to clean up.

 

[Deleted member 28227]

An oil tax increase was on the ballot in the 2020 statewide elections.
In a phone interview, Dunleavy said that Ballot Measure 1, the oil tax increase, “has the potential to hurt, not help.”

The measure could raise an estimated $200 million from oil companies next year, according to state projections, which amounts to about one-fifth of Alaska’s deficit. But companies say the tax increase would thwart investment in Alaska projects and hurt the state’s economy.

Dunleavy said he thinks the issue of taxation is better handled by state lawmakers than through the initiative process — echoing a complaint by resource development groups that initiatives are a major political threat to their projects.

“You get a better process if it’s done by the Legislature,” Dunleavy said.
(The oil tax initiative failed 58 to 42% votes)

Fast-forward to 2023, Alaska Legislature has started preparing the budget for the upcoming fiscal year with an influx of federal funds and high oil prices anticipated to bring in around $1 billion more in revenue compared to a year ago.

If approved by the Legislature, Alaskans would receive a permanent fund dividend (PFD) of roughly $2,500 per person in 2022. Dunleavy also wants legislators to approve a supplemental PFD payment of $1,250 to create a 50-50 dividend for last year.

So it looks like the amount of taxes collected directly correlated to WTI and not production, which is declining. Tax revenues in 2002 virtually the same as 2020 yet with 1/2 the oil flowing.

Meaning... that the state is essentially ever increasing taxes to make up for the fact that less and less oil is being produced.

Good luck with that.



Price of WTI

 

[BigHornRam]

Just following the money and applying Hilcorp's track record for leaving the mess for US taxpayers to clean up.

I get it. You don't like the oil industry........

 

[SAJ-99]

I get it. You don't like the oil industry........

Meh. Can't disagree too much. They don't have the greatest track record on the environment and I don't like using tax policy to enrich one small group of people at the expense of US taxpayers.

 

[BigHornRam]

Meh. Can't disagree too much. They don't have the greatest track record on the environment and I don't like using tax policy to enrich one small group of people at the expense of US taxpayers.

Could be worse. You could be paying European energy prices.

 

[Deleted member 28227]

I don't like using tax policy to enrich one small group of people at the expense of US taxpayers.

Is this true?

 

[SAJ-99]

Is this true?

View attachment 210199

View attachment 210194
View attachment 210195
View attachment 210197
View attachment 210196

Its all the things taken out before you get to pre-tax income that irritate me, like amorts and accruals that depress taxable earnings. Most make accounting sense, but end up lining executives pockets and leaving taxpayers with the bill. I'm not saying other industries don't get favorable treatment too. I have the same feelings about most of the them. But if tax economics are supposed to nudge behavior, why are we still nudging it toward O&G? I particularly don't like the exercise of buying old O&G assets near the end of their life and extending the life to depress amortizing cost of capping the well, only to get to the end of the life of the well and claiming you can't afford the cost of capping. There was almost $20B in the infrastructure bill on capping wells that leak methane. Tax payers always end up paying for this stuff.

 

[Deleted member 28227]

Its all the things taken out before you get to pre-tax income that irritate me, like amorts and accruals that depress taxable earnings. Most make accounting sense, but end up lining executives pockets and leaving taxpayers with the bill. I'm not saying other industries don't get favorable treatment too. I have the same feelings about most of the them. But if tax economics are supposed to nudge behavior, why are we still nudging it toward O&G? I particularly don't like the exercise of buying old O&G assets near the end of their life and extending the life to depress amortizing cost of capping the well, only to get to the end of the life of the well and claiming you can't afford the cost of capping. There was almost $20B in the infrastructure bill on capping wells that leak methane. Tax payers always end up paying for this stuff.

My argument is that OG is no better, actually I think worse because you can’t really escape severance tax by going offshore, than any other industry.

For why OG, how many articles are there about how Biden “needs” to lower prices; how it effects the economy peoples pocket books, etc.

End of the day we are still very much a petroleum society, it’s a national security issue in every sense, . It’s a cannot fail industry… and per my OG index v. S&P 500 graph it’s not like producers are doing that great with the incentives.

Are there individuals making out like bandits… 100%.

I agree with you on plugging liabilities.

 

[AlaskaHunter]

So it looks like the amount of taxes collected directly correlated to WTI and not production, which is declining. Tax revenues in 2002 virtually the same as 2020 yet with 1/2 the oil flowing.

Meaning... that the state is essentially ever increasing taxes to make up for the fact that less and less oil is being produced.

Good luck with that.

View attachment 210178
View attachment 210181
Price of WTI
View attachment 210182

Yes.
When Hilcorp replaced BP in Alaska, Hilcorp’s corporate structure as a privately-owned limited-liability ‘subchapter S’ corporation made it exempt from state corporate income tax that BP paid as a regular corporation.

Another potential problem is with production declining since
peak production in the late 1980s to 1/4 of peak production is pipeline flow.
The lower the production, the lower the flow, the velocity of the oil flow decreases, turbulence decreases, and oil temperature decreases.
An engineering study estimated the pipeline could carry no less than 300,000 to 350,000 barrels of crude per day during the winter before major flow problems prevent the pipeline from operating safely.

 

[SAJ-99]

For why OG, how many articles are there about how Biden “needs” to lower prices; how it effects the economy peoples pocket books, etc.

Agree. Maybe my issue is Americans belief in a god-given right to $2/gal gasoline. I hear one more Boomer or Gen X'er complain about gas prices I might lose my $hit.

 

[bullbugle]

Oh brother. You drive a car/truck?

Are you trying to argue that because a person uses any petroleum products they have to support it being extracted anywhere and everywhere? It sure seems like that's where your going.

 

[BWALKER77]

Are you trying to argue that because a person uses any petroleum products they have to support it being extracted anywhere and everywhere? It sure seems like that's where your going.

They have to come from somewhere. Of course given people are selfish many think it's better to extract them from the third world with little to no environmental regulation.
The parcel in question was set aside specifically for oil extraction. How about we do it safely and responsibly in this country and employ Americans while we do it?
The other thing is you use capitalist like it's a dirty word. The only countries that really care about the environment are capitalist. You ever seen pictures of workers paradises like China or Venezuela?

 

[bullbugle]

I didn't make the original comment, so your capitalist argument needs to be directed elsewhere.

So you would rather we drill in a pristine American landscape, because we have regulations, than say, have a foreign country drill an already highly effed landscape, or have us drill somewhere that is already messed up? If that's the case, it seems like your primary concern is American OG workers, which you may or may not be a part of.

I'm in the middle, let's try to keep the pristine places that way. I may be wrong, but it seems like there's already plenty of places that aren't anywhere near pristine and I'm more than o.k. with oil and gas extraction happening there.

 

[BWALKER77]

I didn't make the original comment, so your capitalist argument needs to be directed elsewhere.

So you would rather we drill in a pristine American landscape, because we have regulations, than say, have a foreign country drill an already highly effed landscape, or have us drill somewhere that is already messed up? If that's the case, it seems like your primary concern is American OG workers, which you may or may not be a part of.

I'm in the middle, let's try to keep the pristine places that way. I may be wrong, but it seems like there's already plenty of places that aren't anywhere near pristine and I'm more than o.k. with oil and gas extraction happening there.

The area in question isn't pristine. Long history of activity.

 

[406dn]

The area in question isn't pristine. Long history of activity.

I suspect by oil and gas field standards it's pretty pristine, lets say compared to the Bakken in western ND.

It is certainly more remote than most places in the US.

I'd be fine with them leaving it be for the time being, even if the O&G industry has already mucked it up a bit.

 

[Akcabin]

Yes.
When Hilcorp replaced BP in Alaska, Hilcorp’s corporate structure as a privately-owned limited-liability ‘subchapter S’ corporation made it exempt from state corporate income tax that BP paid as a regular corporation.

Another potential problem is with production declining since
peak production in the late 1980s to 1/4 of peak production is pipeline flow.
The lower the production, the lower the flow, the velocity of the oil flow decreases, turbulence decreases, and oil temperature decreases.
An engineering study estimated the pipeline could carry no less than 300,000 to 350,000 barrels of crude per day during the winter before major flow problems prevent the pipeline from operating safely.

Probably a good thing that production has been on the increase the last few years since SB-21 was passed. Which incouraged companies to rework older wells. As new technology allows for better extraction technologies.
The petroleum industry plays a big part in Alaskas economy. And Dunlevy is correct when stating that continually changing the tax structure increases risk in development.
There is 30% more wildlife in the arctic now than before oil n gas development. With private industry providing a lot of valuable information with our government biologists.
Yes congress approved funding to go clean up the abandoned wells that were drilled by our federal government.
The local native corporation are some of the richest in the world.
The permanent fund dividend was mentioned. Politicians have tried to take this fund for a long time. A fund that could put 3 billion dollars cash into the local economies. And our university think tank says what have the highest economic value to our state. Many claiming that if the government doesn't have access to spend it the state will go broke. We just have to have more money for more government. Well the fact is the people have continued to so no. And the state government hasn't disintegrated. And the legislature could put the 3 billion in the budget Dunlevy requested. Like the 82% of the public asked them to do.
Anyhows, for me , having the most reliable energy available done in an invironment friendly way is best. A good job is important in life. Our daughter is up there now. 60 below windchill.
I've watched our state grow for many years. I'm an avid outdoors person. Mostly just a guy raising my family n trying to enjoy life. My consensus is that less government is best. I don't need to be saved from myself anymore. I don't mind dirt roads. And know it snows in AK.
And I'll be just fine

 

[AlaskaHunter]

2020 and 2021 Crude oil production in Alaska was 1/4 of the state’s peak production of more than 2 million b/d in 1988..
the lowest production since 1970s when the pipeline was ramping up.
Alaska's oil production now makes up only 4% of all oil production in the United States.

The oil industry is the largest contributor to Alaska’s economy despite the >75% decline in production.
Oil revenues supplied more than two-thirds of the state's budget in 2020.

Another big "industry" in Alaska is funding from the federal government.
For example, Alaska gets the most funding per capita among all states in the recent infrastructure bill....
$6,700 in funding per capita...distant second is Wyoming at $4,479.
Alaska will get over $5 billion in funding from the infrastructure bill.

Alaska is the number 1 state in Federal Grants Received per Federal Taxes Paid.