The Administration claimed production in British
waters had turned around as a result of tax cuts similar to the ones it was
proposing. In presentations to legislators and others, it maintained “Other
Basins Have Turned Production Around” and
highlighted the United Kingdom as its key example.
Here's a slide from one of their presentations:
The Administration’s claims could not have been
further from the truth. Production in the British North Sea could
plunge by 22 percent this year, which would be the biggest drop-off on record. A variety of British news organizations
have warned of the record slump, including the Financial Times and
Telegraph. (See http://tinyurl.com/kgnfz9v).
In addition, this week Reuters (http://tinyurl.com/os4kstv)
reported that drilling in Britain’s North Sea is down dramatically, despite the
tax breaks enacted by the British government and touted as a model for Alaska by
Parnell.
LONDON,
Oct 22 (Reuters) – “The number of wells drilled in the British North Sea fell
by more than a third in the third quarter, potentially raising further concerns
about the region's outlook after a downgrade to production forecasts earlier
this year.
During
the three months to Sept. 31, the summer period which is traditionally
Britain's busiest for drilling, 11 exploration and appraisal wells were
started, 35 percent lower than the same period last year, a survey by Deloitte
Petroleum services said on Tuesday.
The
number of wells drilled in the third quarter was also 31 percent lower than in
the second quarter of 2013. Britain's oil and gas production from the North
Sea has fallen by about two thirds since 2000 and posted particularly steep
falls of 14.5 percent last year and 18 percent in 2011.” (Emphasis added.)
For example, on February 28, 2013,
then-Commissioner Sullivan told the Senate Finance Committee:
“One of the questions as we were preparing this tax bill over the past
several months with the Department of Revenue is, we asked the question, ‘Hey,
can we turn this around? Have other
basins, either in North America or throughout the world turned around
throughput declines?’
And, Mr. Chairman, as these next few slides will indicate, the answer in
some ways was kind of surprising. It
wasn’t that we were searching for who has been able to do this, we realized
that almost every major basin is doing this, is turning around their
production declines with one very significant exception – the State of
Alaska.
So, for example, this is an example that has gotten a lot of news in the
last three or four weeks: the North Sea, another huge mature oil basin within
the U.K. went through a similar situation with us. A big basin.
Declining production.
Three or four years ago, they cranked up oil taxes on the companies, predictably
a lot of the companies left, production declined even more and in the last year
or year and a half, the U.K. has
undertaken significant tax reform, but already it’s leading to very, very vast
increases in investment and production, anticipated production,
anticipated state revenues for the U.K.
Just about three days ago, the Wall Street Journal did a big, big
article on this tax reform, increase in production, and I think it’s
very analogous in many ways for what we’re trying to do here in the State of
Alaska. So, that’s a good example. (Emphasis added.)
Investment in the British North Sea increased in 2012 before the tax cuts were even instituted and continued in 2013. But this increase is expected to lower next year, according to Oil and Gas UK, an industry lobbying group. It is expected to drop from 13.5 billion pounds this year to 8-10 billion pounds in 2015 and thereafter. Most of this spending is on aging infrastructure and decommissioning of offshore oil rigs that are no longer productive.
