JUNEAU — The state Revenue Department is forecasting higher oil production than previously expected, though the overall, long-term trend is still one of decline.
North Slope production for this year is now forecast at 521,800 barrels per day, up from the 508,200 barrels per day forecast in December, which Deputy Revenue Commissioner Bruce Tangeman called a “banner headline.”
The spring forecast, released Monday, anticipates a dip to about 496,000 barrels per day in fiscal year 2015, which Tangeman said accounts for what is expected to be an active summer maintenance season in line with the projected new industry investments.
The forecast calls for increased North Slope oil production over what was forecast last fall from 2016 to 2023, though the overall trend would still be one of decline, with North Slope production of about 315,000 barrels per day by 2023.
Tangeman said the department has greater confidence in the near-term numbers than those in the outlying years. He said the methodology now used for the forecast is more conservative, meant to provide a more reliable tool around which to plan state spending. While he said the department recognizes the upside potential for more oil in the future, it is not yet banking on it for the purpose of this forecast.
Sen. Bill Wielechowski, D-Anchorage, said the forecast continued to show that the oil production tax-cut approved by the Legislature last year is an “abysmal failure” and has gotten the state nowhere near the 1 million barrel per day goal that Gov. Sean Parnell used to talk about. Supporters of the tax cut, including Parnell, see it as a way to boost investment and lead to new production, and they say it is already yielding positive results. Wielechowski opposed the tax cut and is supporting efforts to repeal it.
“I don’t know how you read these (numbers) and take anything good away from this,” he said.
The current budget year was split between the old tax structure and the new one.
As for revenues, the department is forecasting $5.3 billion in unrestricted general fund revenue for this year, up from $4.9 billion forecast last fall, and $4.5 billion for next year, down slightly. Revenue Commissioner Angela Rodell, in a letter to Parnell accompanying the forecast, said the dip in next year’s estimate is due to less in expected investment earnings.
The state is expected to receive $2.4 billion this year from the oil and gas production tax and $1.7 billion next year, both estimates up from last fall’s forecast. The state received about $4.1 billion in fiscal year 2013.
While oil revenues are expected to remain the state’s major source of unrestricted revenues, they are expected to contribute as little as 82 percent of unrestricted general fund revenues over the forecast period through 2023. That compares to about 89 percent for this year. The state will need higher oil prices, of around $100 a barrel, and/or stable or increasing production to maintain stable or increasing state revenue, the forecast said.
Revenue forecast: http://1.usa.gov/19i5U1E