Alaska Falls to Fourth in Nationwide Oil Production

Despite vast natural reserves, Alaska no longer produces the most oil in the country.

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Without more volume, the Trans-Alaska pipeline is in danger of freezing.

(PRWEB) January 02, 2014

As a whole, the United States is well on its way to becoming one of the preeminent oil powers in the world. Texas alone is poised to leapfrog several OPEC members in total production next year, and the country in its entirety will produce 9.6 million barrels per day by 2016, according to the Energy Department.

Strangely, however, one state hasn't been a large part of this most recent boom: Alaska.

This relative lack of contribution is surprising because, in many ways, the state's fortunes are intimately tied with the industry. Because it has no income, property or sales tax, oil revenue plays a huge role in providing funding for a wide variety of projects. In fact, some 90 percent of the state budget is financed via oil sales.

And it's not just the government. The residents themselves have a strong stake in these revenues, since some of the money is dispersed to them every year in the form of checks sent to every man, woman and child in the state. These sums aren't paltry, either: this year, they came out to nearly $900 per person, an amount which adds up quickly in larger households.

These dividends don't just support families, they support the economy at large. Simply put, the more cash people have to spend, the more willing they are to spend it. Paul Hughes, who owns a snowmobile shop near Anchorage, knows this value well. Not only was he able to finance important household repairs with one of the checks his family received, he also sees a boost in vehicle sales every year when the oil money is divvied up.

Unfortunately, that money has been amounting to less and less as time goes on.

At one point in 1988, the state was pumping out more than 2 billion barrels per day. Now, it produces just a fourth of that amount, an output so small that officials are worried that the Trans-Alaskan pipeline may freeze over and have to be shut down.

The problem isn't necessarily one of resources or access. According to officials, there are billions of barrels left in the North Slope alone, and modern oil production technology is more sophisticated than ever. Biodegradable drilling mud and fracturing chemicals can tap into reservoirs once thought inaccessible, and companies like Rapid Drilling and Chem Rock Technologies are providing these and a whole host of other advanced solutions to help produce the energy America needs to remain competitive.

Instead, the problem in Alaska appears to be one of taxation. Due to a measure passed in 2007, taxes on crude production have jumped, up to as high as 75 percent in some cases. As a result, companies are looking elsewhere to develop wells, and Texas, North Dakota and California have all climbed ahead of Alaska in terms of oil output.

"If we don't change things we're going to be out-surpassed by Oklahoma," says Kara Moriarty, who represents the state's oil industry.

Currently, Governor Sean Parnell is pushing a 35 percent flat tax that he hopes will encourage companies to set up shop in Alaska. If this doesn't succeed, the state could very well soon find itself tumbling further and further down the rankings.