Entire article reprinted from “The Link,” 3d Quarter 2010, Alaska Support Industry Alliance (http://alaskaalliance.com/pdf/3rd_quarter_2010_link1.pdf). Written by The Alliance Staff.
ACES: The gift that keeps on taking (jobs and investment)
Oil and gas employment in Alaska has tumbled to its lowest level since late 2007 after a year when 1,500 jobs were lost and unemployment claims in the support sector more than doubled. Data compiled by the Alaska Department of Labor & Workforce Development’s Research & Analysis Section show that since a modest rebound during the first quarter of 2010, oil and gas employment fell again in the second quarter and by mid-year stood at its lowest level in 30 months.
In all, 1,700 oil and gas jobs have been lost since employment peaked at 13,700 in December 2008. Preliminary data had oil and gas employment at 12,000 in June this year – down 200 from May and 700 from February.
Meanwhile, unemployment claims in the oil and gas support sector have skyrocketed as well, according to the Department of Labor, with 2,345 unemployment insurance claimants in 2009 compared to 1,162 in 2008.
The oil and gas industry has been battered by the downturn in the global economy, the precipitous decline in oil prices in 2008 and recently by federal offshore drilling restrictions.
But while the active drilling rig count in the Lower 48 more than doubled in the last half of 2009, Alaska’s declined. According to the Alaska Oil & Gas Conservation Commission, exploratory and development drilling sank to 10-year lows last year. A single exploratory well was drilled on the North Slope.
Alaska’s punitive oil and gas taxes and unfriendly regulatory and permitting climate also have been instrumental in driving away investment and jobs.
A recent survey by an international research organization found Alaska once again near the bottom of the list of states in terms of attractiveness for oil and gas investment in the U.S. and trailing jurisdictions like Alberta, Australia, Vietnam, Norway and the U.K. globally.
Vancouver-based Fraser Institute annually polls upstream oil and gas executives on jurisdictions’ business and regulatory climates and their impact on investment decisions.
In its 2010 Global Petroleum Survey, Alaska ranked higher than only California, Florida and New York among states and was 68th among 133 regions worldwide. South Dakota and Texas topped both the U.S. and global lists as the most attractive places for oil and gas investment. Austria and Manitoba, at fifth and eighth, were the highest-ranking jurisdictions outside the U.S. [Note: Even with all of its associated challenges, Alaska – Offshore, ranked higher than Alaska – Onshore. Alaska – Offshore ranks 57th in the 2010 Survey; Alaska – Onshore ranks 68th.]
Alaska’s ranking in the Fraser survey plummeted in 2008 after the state retroactively imposed the multibillion-dollar production tax increase known as “Alaska’s Clear & Equitable Share,” or “ACES,” in late 2007.
Prior to ACES, Alaska ranked 14th among 54 jurisdictions included in Fraser’s initial Global Petroleum Survey. In 2008, the state dropped to 60th among 81 jurisdictions.
ConocoPhillips estimates more than $2 billion in development projects have been deferred in Alaska since ACES.
A disproportionate share of capital spending in Alaska has gone toward maintenance projects that generate temporary employment rather than development work that provides long-term jobs and production. BP said earlier this year its drilled footage has declined by half since ACES was adopted, and investments in development projects are down 30 percent.
In the months immediately after ACES was imposed, oil and gas employment sustained several years of growth, fueled by infrastructure repair and maintenance work in the wake of a significant oil spill at Prudhoe Bay in 2006 and developments like Pioneer’s Oooguruk project that already were under way or sanctioned.
Now that maintenance has returned to a more sustainable level with little new development work to fill the void, hundreds of oil industry jobs have been transformed into unemployment claims.