ConocoPhillips data reveals drilling decline in Lower 48, Canada

Wells numbers up in Alaska since ACES, down elsewhere, filings show
Oil well heads and other oil production buildings spead over the coastal plain in Alaska's Prudhoe Bay.

Since the passage of a profits-based oil tax system several years ago, the state’s biggest oil producer, ConocoPhillips, has significantly reduced its oil drilling.


That reduction, though, came in the Lower 48 and Canada, not in Alaska. Here, it held steady despite the tax increase the company despises.

The information on drilling comes from the company’s filings with the Securities and Exchange Commission. It provides more detail to investors than other major oil producers active in Alaska, including detailed data on well drilling.

The ConocoPhillips drilling information appears to contradict one of the common messages from advocates of Gov. Sean Parnell’s proposed tax reductions — the oil tax is reducing investment in Alaska.

“It illuminates why the Senate is taking a careful and exacting approach to oil tax reforms,” said Sen. Hollis French, D-Anchorage, who has challenged arguments from Parnell and others linking ACES to the decline.

Parnell seems to be one of those blaming the ACES tax for the decline saying “we’ve already lost 140,000 barrels a day in the last four or so years.”

Daily oil production is now about 600,000 barrels, down from about 740,000 when ACES was passed. It was once much higher, nearly 2 million barrels a day at its peak.

Production declined by more than a million barrels a day before the profits tax was adopted, a time when North Slope oil fields paid a much lower gross tax and many weren’t taxed at all.

That changed in 2006, when the Alaska Legislature adopted the profit-based Petroleum Profits Tax, and then returned after oil industry executives admitted bribing several legislators, and passed Alaska’s Clear and Equitable Share Act in 2007.

Parnell said that tax, passed under and with the support of former Gov. Sarah Palin, went too far.

“When oil prices are at this high rate, we’ve seen production continue to go down and investment continue to go elsewhere,” he said.

The state Department of Revenue has documented increased oil company spending in Alaska since ACES, but that has been dismissed as simply maintenance of aging infrastructure.

The new drilling information from the SEC shows that at least one company has been investing more in producing new oil.

ConocoPhillips completed 30 new production wells in Alaska in 2006, rising to 46 in 2007 and then 47 wells in each of 2008, 2009 and 2010. In 2011 it completed 41 new wells, according to the SEC filings.

That contrasts to the company’s Lower 48 operations, which averaged completing around 600 wells per year from 2006 to 2009, declining to 269 in 2010 and 350 in 2011.

Canada drilling by ConocoPhillips has also declined, peaking at 649 wells in 2006, and declining to 186 in 2010 and 146 in 2011.

Those numbers don’t include the far smaller number of exploration wells.

The total number of production wells in which ConocoPhillips owned all or part of in Alaska was 1,620 in 2006. That number rose to 1,902 last year.

Down south, things were different. ConocoPhillips wells in the Lower 48 and Canada each declined by several hundred between 2006 and 2011.

ConocoPhillips spokeswoman Davy Kong stated in an email that was not the case last year, highlighting the numbers in Alaska and the Lower 48 specifically.

“The number of productive development wells completed in Alaska decreased from 47 to 41 (2010 to 2011). Over the same period, the number of productive development wells completed increased from 269 to 350 in (the) Lower 48,” she said.

She declined to answer questions about the overall ConocoPhillips decline in Lower 48 and Canada drilling and wells.

ConocoPhillips Alaska spokeswoman Natalie Lowman referred questions about Lower 48 and Canada operations to Kong, and provided no additional information.

ConocoPhillips is the state’s largest oil producer. While it is the only one of the state’s major producers to detail its Alaska operations to that level of specificity, many of its wells are jointly owned with other producers and may provide an indication of their operations as well.

Those advocating for Parnell’s oil tax cuts have been saying Alaska is lagging other states in oil investment and production since the adoption of ACES, and say drilling in Alaska is stagnant while investment is going elsewhere because of high taxes.

“Developmental drilling has remained virtually flat since 2007 at a time when it should be booming because of these high oil prices,” said Tom Maloney, president of the Resource Development Council, in testimony to the Legislature in support of Parnell’s bill.

Maloney is also the Alaska manager for CH2M Hill, the state’s largest oilfield service company. It was once known as VECO Corp.

Alaska’s big Prudhoe Bay, Kuparuk and other oil fields are mostly controlled by ConocoPhillips, BP and Exxon Mobil Corp., which make production decisions together.

Those companies have been active in drilling thousands of new natural gas wells in the Lower 48 and Canada in a race to acquire new shale gas production, but are unable to develop their Alaska natural gas resources due to a lack of a pipeline to get to market.

• Contact reporter Pat Forgey at 523-2250 or


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