Friday, March 1, 2013

It’s time for Alaska to get back in the game on oil taxes

Bill Armstrong Guest Commentary

Gov. Sean Parnell has introduced new oil and gas tax legislation. The governor’s proposal is a huge improvement over the current law and is a major step in the right direction for Alaska — and Alaskans.

You may not have heard of Armstrong Oil & Gas, Inc., but we, and our affiliates, began extensive work exploring new oil and gas potential in Alaska in 2000. Since then, we have been responsible for the origination of three of the most recent stand alone developments in the state; two on the North Slope and one in Cook Inlet.

Our exploration efforts have provided significant revenues to the state, jobs for Alaskans, new oil production for the Trans-Alaska Pipeline, and new supplies of natural gas for Southcentral Alaska.

Armstrong is now one of the largest leaseholders in the state and one of the state’s largest investors. We are true believers in Alaska’s potential. But sadly, as we hear from so many of the companies that we try to encourage to invest in the state. Alaska is simply not competitive with other oil and gas provinces around the world.

There is a major energy boom happening in the United States, but Alaska is not benefitting from this boom. New drilling and completion technologies have been a godsend for the continental United States, and specifically to states where these technologies are being put to use. This energy boom, which is thriving in states like Texas, Oklahoma, North Dakota and Pennsylvania, has completely bypassed Alaska.

For the week of Jan. 7, Texas had 830 active rigs drilling, Oklahoma had 183, North Dakota had 174, and Pennsylvania had 80. Alaska had 8. Alaska’s constitution calls for maximum benefit from the development of natural resources, but how do Alaskans benefit if the state tax structure makes potential developers look elsewhere?

Oil production in Alaska is declining…steadily and relentlessly. And yet, the entire state economy is based on the income from this vast resource potential. It is a resource that created the Permanent Fund, returning hard dollars from production to every man, woman and child in the state. Alaskans must confront the fact that prohibitive regulations, onerous permitting and an unprecedented tax burden are scaring away the kind of investment necessary to maximize production potential that benefits all Alaskans.

This is bad news – but the good news is that these are man-made problems and therefore, they can be fixed. Gov. Parnell’s proposed tax law starts to do just that.

While not perfect, the governor’s changes are a major step toward increasing exploration activity and bringing substantial new investments to the state; investments that will increase production and generate new jobs for Alaskans.

The governor’s tax bill is certainly not a giveaway to “big oil.” It does not jeopardize the state’s balance sheet with tax credits, and it firmly makes the state’s fiscal regime competitive with the rest of the world. It is aimed at making Alaska provide maximum benefit from resource development to all Alaska shareholders — you and your family.

Alaska needs ConocoPhillips, BP and Exxon to aggressively conduct business in the state, but Alaska also needs new companies such as Pioneer, ENI, Repsol, Armstrong and others to compete and invest as well.

Gov. Parnell understands this, and he clearly has the state’s long-term best interest at heart. The choice for Alaskans is simple and clear. The current ACES tax burden has crushed development and new investments and will jeopardize Alaska’s economic health in the long-term. The governor’s proposed oil & gas tax changes will increase production, provide more high paying jobs, and increase revenues for the state.

Armstrong Oil & Gas is a true believer in Alaska’s energy potential, but we and the other new companies looking at playing a role in Alaska’s future need to see a stable tax structure we can confidently invest in.

It’s time for Alaska to get back in the game, bring drilling back to the state, and reap the economic benefits this will bring for all Alaskans. We look forward to being a part of an exciting new generation of development.

Bill Armstrong founded Armstrong Oil & Gas, Inc. in 1985 from the attic of his 100 year-old garage/barn in Denver. He can be reached at

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