On Monday, BP committed to spending at least a billion dollars in Alaska over the next few years. The oil giant plans to use that money to bring two drill rigs to Prudhoe Bay and to potentially expand into undeveloped parts of that field. The announcement comes on the heels of a major change to the state’s oil tax system.
“That change in the taxes really allowed us to move forward and get the support of the working interest owners to move these projects forward,” says Dawn Patience, a spokesperson for BP.
Patience says that BP will be adding 200 jobs to their Alaska operations just to bring on the new drill rigs. She says that BP is also working with Exxon and ConocoPhillips to start building up the western part of Prudhoe Bay, which could mean more than 100 new wells in that area.
BP can’t say how much new oil these developments will yield. But the Parnell administration is applauding the announcement, and the Department of Revenue says the new rigs are good for the state treasury. During the oil tax debate, the Department was estimating that the legislation would cost the state at least $3 billion in lost revenue over the next five years. Oil tax adviser Mike Pawlowski expects that number to go down substantially with BP’s new rigs.
“The fiscal note we always put out as a worst-case scenario with no new investment and new production,” says Pawlowski.” And this is obviously different. We’re seeing significant new announcements. So, I think overall it’s very exciting.”
Not everyone is celebrating BP’s announcement. At the end of the legislative session, Democratic lawmakers who opposed the oil tax cut said they expected to see lots of “brass bands” and “ribbon cuttings” for work that was already expected to happen. Bill Wielechowski, a senator from Anchorage, says that BP’s announcement is part and parcel of that.
“It’s a shame that the governor gave away billions and billions in tax breaks to get something that the oil companies were going to do anyway because it’s so profitable.”
Wielechowski adds that one of BP’s Alaska executives already acknowledged that some of the work that they’re planning to do would have happened anyway, just at a slower pace.
BP will be putting contracts for the rigs out to bid this summer, and they expect the first of the two to go online in 2015. Spokesperson Dawn Patience says that the company is not factoring in a referendum to repeal the new oil tax system in its investment decisions. That referendum could be on the ballot next summer, while the rig work is underway.