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Governor Lays Out Prudhoe Bay Management Plan Edit

FOR IMMEDIATE RELEASE: August 9, 2006 No. 06-179

Murkowski Lays Out State’s Plan for Managing Prudhoe Bay Shutdown; Announces Hiring Freeze and Calls for Passage of New Oil Tax, Approval of Gas Pipeline Contract

In remarks today to a joint session of the Alaska Legislature, Governor Frank H. Murkowski briefed lawmakers and the public on his administration’s interim management plan to address BP’s shutdown and plans to resume oil and gas production at Prudhoe Bay, the nation’s largest single oil field.

The governor appointed a cabinet-level team “to make certain that the environment is protected and that there is a strong corrective action plan and a safe business resumption plan in place as soon as possible.” The team will be led by Natural Resources Commissioner Mike Menge, and includes Environmental Conservation Commissioner Kurt Fredriksson, Revenue Commissioner Bill Corbus, Attorney General Dave Marquez, and John Katz, the director of the state’s Washington, DC office.

The governor has also asked Attorney General Marquez to look into the legal aspects of the shutdown and the impacts to the state. He noted that it would be irresponsible for the state not to seek to reconcile BP’s reports on pipeline maintenance and conditions over recent years with the company’s abrupt decision to shut down the entire Prudhoe Bay field.

“The attorney general will review the state’s legal rights and determine an appropriate course of action to protect the state’s interests, including the state’s right to hold BP fully accountable for losses to the state,” Murkowski said.

“Alaska has had a wake-up call,” Murkowski said. “With 86 percent of our revenues coming from oil taxes, we are vulnerable to any decline in production. Without a gas pipeline, the reduced level of oil production BP proposes with this shutdown is what Alaska can expect in ten short years. This is why moving on the gas pipeline contract now is so vital to Alaska.”

The state estimates the loss of Prudhoe Bay’s daily production of 400,000 barrels of oil means a drop in $6.4 million per day in state revenue.

Murkowski also pointed out that with Prudhoe Bay production shut down, the state must depend on taxes from other fields, some of which, under the Economic Limit Factor in the current tax structure, pay no production taxes at all.

“Kuparuk, the second largest field in North America, currently pays zero production taxes on the 172,300 barrels per day it produces,” Murkowski said. “Under my tax revision under consideration in the Legislature, this would bring Alaska $1.6 million per day at current oil prices.”

Murkowski also announced that he is instituting an immediate hiring freeze on state workers and has asked the Office of Management and Budget to ready a management plan to protect vital state services during the oil field shutdown.

The hiring freeze will cover the principal departments of the executive branch of state government, and is patterned after a hiring freeze put in place immediately after Governor Murkowski took office in December 2002, when the state faced an $800 million budget deficit. At that time, the hiring freeze covered only exempt and partially exempt employees, however, the current freeze also covers employees in the classified service.

The hiring freeze does not apply to positions critical to protect the public’s health and safety, such as state troopers and correctional officers, or to positions that provide patient and residential care in 24-hour facilities.

from State of Alaska News & Announcements

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