Liam Zsolt

GUEST COMMENTARY: Getting our ‘Fair Share’ of a bigger pie

Meet the Fair Share Act: a ballot initiative that will be presented to Alaskans in November, marketed as a measure to make oil companies pay their fair share in taxes. I did a bit of research to bring some simple analysis forward and present it to concerned Alaskans, to help cut through the noise and disinformation. Starting with where we are currently, more than 70 percent of total Alaska state revenue from private business is provided by oil and gas: In addition, Alaskans benefit from the philanthropic activities by oil and gas companies every day. The University of Alaska Arctic Science and Engineering Endowment, Covenant House, the Alaska Performing Arts Center, and the Anchorage Museum of History and Art are just a few examples. The budget cuts that Alaskans are currently adjusting to would be modest compared to cuts stemming from a significant reduction in petroleum activity. The initiative calls for a rework of our current oil tax structure. It claims to have the potential to generate billions in additional taxes ($1.1 billion in in 2018). This increase amounts to at least 50% of the taxes that oil companies are currently paying on the majority of the barrels in the state, doubling or tripling it at higher oil prices. With BP leaving Alaska fresh in my mind, I asked myself if taxes really had the ability to incentivize development activities. Last time we thought about this was when our legacy tax regime (ACES) transitioned to the current SB-21 framework. The data is available to the public: Each year we were losing 40,000 barrels per day of production under ACES, a trend that was almost immediately arrested under SB-21. The trend line above indicates we are hundreds of thousands of barrels per day (hundreds of millions in royalties) better off than we would be if the decline had continued under ACES. To reverse the decline, BP flattened their decline curve, and ConocoPhillips and Hilcorp both grew production significantly. I think a similarly unfavorable tax regime like the Fair Share Act could cut our production in half within seven years. This will more than offset amounts gained in the very short term, and cripple any growth in the industry that employs the most Alaskans and is fundamental to our economy. So how are we going to bring in more state revenue under the current tax regime, and how much? Let’s look at the three biggest development projects on the horizon since SB-21 was passed: •Willow, ConocoPhillips: 130,000 barrels/day (Source: Willow Draft EIS) •Pikka, Oil Search: 120,000 barrels/day (Source: Oil Search Annual Report, 2018) • Greater Mooses Tooth 2, ConocoPhillips: 25,000 to 30,000 barrels/day (Source: ConocoPhillips GMT-2 Fact Sheet) These projects have the potential to add 280,000 barrels per day, or more half of Alaska’s current production. This could amount to $1.1 to $1.4 billion in additional royalties and taxes, a number we can expect to continue to grow as the recent flurry of exploration and development activity continues. Staying the course is the most financially sound decision. Fundamentally, I think people forget that oil companies have a choice about where to invest their money. In recent years, we have watched the major companies gravitate towards the Permian Basin. Texas is now at record production levels (a condition that Alaska has not enjoyed since the late 80’s). Oil companies make these decisions, in part, based on a predictable, business-friendly geopolitical environment. A stable environment creates jobs. As our partners in development continue to invest in Alaska, confident in their future here, Alaskans are enriched and our economy is built. Staying the course will put Alaskans back to work. When we passed SB 21, Alaskans made a commitment to host a responsible industry with a particular tax regime so we could maximize our benefit from developing our rich resources. Industry has responded by placing Alaska high within the global portfolios of ConocoPhillips, Oil Search, Hilcorp, and many others, through tough operating conditions and stringent environmental standards. Staying the course is, beyond being a good financial decision, the right thing to do. Alaskans who want to see our beautiful State’s revenues increase should support the continued health of Alaska’s oil industry, and vote no on the Fair Share Act. Do not move the goalposts for our children; vote no to keep Alaska’s future sustainable for our next generation. ^ Liam Zsolt is the Director of Technology for ASRC Energy Services LLC. His work in applying new technology to responsibly extract oil and gas in Alaska has been published multiple times by the Society of Petroleum Engineers and led to multiple patents.

COMMENTARY: Concerns misplaced over ANWR impact on carbon emissions

On Feb. 11, I had the privilege of watching democracy in action, right here in Anchorage. The draft environmental impact statement, or DEIS, for the Arctic National Wildlife Reserve was released, and public comments were taken at the Dena’ina Civic and Convention Center in Anchorage. The Bureau of Land Management furnished us with maps of the different development scenarios, impacts on the indigenous people and animal species, and a strong education on the process. Hats off to the agency for sitting through six straight hours of public comment by stakeholders from both inside as well as outside of the protected region, with a wide spectrum of coherence. Many of the comments were spot on, but many others diverged widely from the scope of the report. I was struck by a conspicuous lack of discourse on the specific threats that development poses to the Porcupine caribou herd, which is central to the controversy surrounding the development of ANWR. Despite its minimal appearance in the public comment period, the actual DEIS addressed this issue very well. However, opponents of the leasing program did not allow a lack of education on the issue to stand in the way of holding the microphone hostage. They used the airwaves to discuss many issues, one common thread being the potential greenhouse gas emissions. One activist was bold enough to implore the BLM to consider the carbon created during the end use of the hydrocarbons. Of course, had this activist read the DEIS, they would find that use-phase CO2 impacts were actually addressed very well. I thought it would be interesting to provide a bit of color and more technical detail around this hot subject. The draft report recognizes (correctly) that additional upstream hydrocarbon development does not have a one-for-one impact on oil and gas demand. Developing ANWR to its full potential will not actually add 390,000 barrels per day to the world’s oil consumption. It will almost displace that much oil already on the market, and then add a fraction of that as a result of bringing the price down. Between the direct emissions generated by the development itself and the indirect emissions generated by the modest increase in global demand, the report ultimately arrives at the conclusion that ANWR development would increase global emissions by between 0.76 and 5.38 million metric tons of CO2 over the field life. This is 11,000 to 77,000 metric tons per year, or about 0.5 kilograms per barrel produced. It’s hard to picture what this means in real life, so in context, the average barrel of North Slope crude oil produces 564 kilograms of CO2 throughout its life. Augmenting this by 0.5 kilograms for the barrels produced by the ANWR development is a 0.1 percent increase. If anything, the report was too fair. Alaska North Slope crude is typically refined in California, meaning that ANWR development is likely to offset declining California barrels as a refinery feedstock. California, despite its green image, produces the dirtiest crude in the nation at 725 kilograms of CO2 per barrel. With this in mind, we are likely offsetting dirtier crude with cleaner crude, should we develop ANWR. The reality is that the North Slope has a legacy of environmental responsibility that shines among the prolific oilfields in the world. This great corporate citizenship is not being left behind in the age of climate change. BP recently announced the purchase of 9.3 million metric tons of carbon offsets from Ahtna. My employer, ASRC Energy Services, has seen a strong trend of clients asking for greenhouse gas, or GHG, reduction solutions. It’s an exciting time to be a part of a changing industry. The GHG impact of ANWR development pales in comparison with the potential in demand reduction. People who care about climate change should work to change their habits. Boeing 737s make an astonishing 11 metric tons of CO2 for a short 575-mile flight. An electric vehicle can take 4.5 metric tons of CO2 per year out of the atmosphere. Tesla therefore sold enough cars in 2018 to solve the worst-case ANWR carbon emissions scenario 11 times over. People can truly impact GHG emissions on the demand side, by changes in their everyday life. To conclude, carbon emissions may be the defining issue of the decade, but they are far from the most important issue related to ANWR development. We will continue to develop and produce oil on the North Slope with world-class corporate responsibility, and drive hard toward a low-carbon future. Proponents of ANWR leasing are open to constructive input on responsible development scenarios. This should be seen as an unprecedented opportunity to collaborate between industry, regional stakeholders, and concerned Americans to reach a plan that benefits everyone. People engaging in the process would be advised to learn more about the issues, the proposal and the process itself. In this way, the discussion can be elevated and constructive outcomes achieved. I want to again thank the BLM for a great presentation, an excellent report (which was delivered through a government shutdown), and for great patience shown throughout these hearings. I hope the conversation in the future can remain focused on the relevant elements, such as the impact on coastal plain wildlife. Finally, I hope that the needs and wishes of the regional stakeholders are met, especially the Iñupiat people of the village of Kaktovik, as they have the greatest at stake. ^ Liam Zsolt is the Director of Technology at ASRC Energy Services. He is originally from Canada, obtaining his Bachelors of Chemical Engineering from McGill University in Montreal. Zsolt’s work in well interventions has been published four times by the Society of Petroleum Engineers, and was awarded one US Patent for innovations in the field of materials inspection by magnetic flux leakage.
Subscribe to RSS - Liam Zsolt