Caelus Energy announces major cuts, sharply criticizes Walker oil tax bill

Caelus Energy Alaska announced Friday, April 8 that it would cut its workforce by 25 percent in response to low oil prices and “uncertainty in Alaska’s oil tax system.” (Website screenshot April 9, 2016)

Caelus Energy Alaska announced Friday, April 8 that it would cut its workforce by 25 percent in response to low oil prices and “uncertainty in Alaska’s oil tax system.” (Website screenshot April 9, 2016)

North Slope oil producer Caelus Energy announced Friday it will lay off 25 percent of its 80-person workforce and suspend drilling at the Oooguruk oil field, potentially affecting hundreds more contractor jobs.

In a sharply-worded letter to Governor Bill Walker, Caelus CEO James Musselman blamed not only low oil prices — but also the governor’s efforts to reform Alaska’s oil tax system.

Musselman said the Walker administration’s proposals to scale back subsidies for smaller companies like Caelus — and to raise the minimum oil tax — have “significantly damaged investor confidence in Alaska.”

“We feel like the proverbial canary in the coal mine,” Musselman wrote.

On Saturday morning, Caelus senior vice president Pat Foley testified emotionally before the Senate Resources committee, which is considering the governor’s oil tax bill.

“On Monday I’m going to have the very unpleasant task of sitting across the table from smart, hardworking, caring, dedicated, hopeful people, my companions, many of whom I’m honored to call my friends,” Foley told the committee, speaking via phone from Caelus headquarters in Dallas. “And I’m going to explain to them that within a matter of days, their employment will end. And I can assure you, no matter what side of that table you find yourself, it’ll be simply horrible.”

Some lawmakers bristled at the suggestion that the state is responsible for the company’s struggles.

Anchorage Democrat Bill Wielechowski asked Foley whether it was state policy or oil prices driving Caelus’s decision.

“If the state were to make no changes to our oil tax structure, or our tax credit system, are you prepared to reverse your decision?” Wielechowski asked.

“It is price that has forced us to make the decision that we’ve made,” Foley said. “But I’ve also testified that we hope for price recovery. And if the tax system becomes less favorable, it’s going to take a higher price in the future for us to re-initiate our drilling activities.”

The announcement is the latest in a string of layoffs and reductions in Alaska’s oil and gas industry, as the price of oil remains stuck near $40 a barrel.

BP and ConocoPhillips both announced layoffs in the past year, as have several oilfield contractors.

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